Human Resources Committee on May 12th, 2022

[Thom Armstrong]

Am I ever glad you asked that question. I was hoping we'd all get a chance to answer your first question, because is there any higher or better use for housing than to provide safe, secure, affordable housing in a community-based setting? Anyway, the answer to that requires someone else's expertise.

We shifted our attention to acquisition because of the trend we see in the markets. Governments everywhere, particularly in B.C. and Quebec and particularly the federal government, are investing a lot of money in new, affordable supply programs, but because the existing purpose-built rental stock is being captured by investors at a rate in B.C. of three homes for every one new home being built under the affordable housing programs sponsored by the government, even if we're wildly successful in accomplishing all of the goals of the announced programs around new supply, we'll still experience a net loss of affordable homes at the end of the 10-year period of the national housing strategy. It's maybe an understatement to say that would be a suboptimal outcome for the program.

So we have recommended that especially in this economic cycle, in which our business construction costs are going up at the rate of 2% a month and the cost of money is increasing.... In a meeting during the last government, we were sharing some observations with other witnesses before we started, and the last Bank of Canada announcement cost us $4 million overnight on the capital cost and the debt service of one of the affordable housing developments we're looking at.

Now, we don't have any control over that, but it seems to me that we need to create some flexibility in the fund as it's being announced so that we can turn the focus of the fund to where it will have the most impact. Maybe, for the time being, in certain markets, it's acquisition of the purpose-built rental stock that's at risk of being captured with tenants at risk of being displaced, and so the rents will inevitably climb to deliver the return that investors legitimately expect from the acquisition of those assets.

[The Chair, Liberal, Bobby Morrissey]

Madam Zarrillo—

[Bonita Zarrillo, NDP, Port Moody—Coquitlam, BC]

You know, we've heard alarming testimony.... Am I done?

[The Chair, Liberal, Bobby Morrissey]

You're over by a minute, Madame Zarrillo.

[Bonita Zarrillo, NDP, Port Moody—Coquitlam, BC]

Okay. I just wanted to let Mr. Armstrong know—

[The Chair, Liberal, Bobby Morrissey]

You can get to that point in your next round.

We will go to Mr. Ruff for five minutes.

[Alex Ruff, Conservative, Bruce—Grey—Owen Sound, ON]

Thanks, Chair, and thanks to all of the witnesses for coming today.

My first question will be for FCM. It's again to make sure that it's clear on the record that despite the mandate letter for the minister around the housing accelerator fund really being just focused on housing supply in our larger cities, based on the budget and your understanding, representing all municipalities—or the vast majority of them across the country—this funding is going to be made available to rural communities as well.

For example, I have one project that I just got briefed on earlier this week, Ste. Clare's, which is focused on affordable housing apartment units for seniors. They're impacted on so many costs due to the construction costs that have gone up. Where they were originally funding $3 million for the construction, it's now estimated at $7 million.

Can you just clarify that it's your understanding this fund will be made available for urban and rural areas?

[Daniel Rubinstein]

We have a board of directors of urban and rural mayors and councillors, and the housing crisis is being felt everywhere—that's for sure. Those cost increases are being felt everywhere.

The budget clearly indicates that the fund will be accessible to rural—smaller communities are growing quickly—and we welcome that.

A comment I made in my opening remarks was to suggest a way to make sure that rural and small communities have access to the program in a predictable way. Creating a carve-out where they're not competing against the economics of programs that are for larger centres makes sense. There's a way to do that, and again, we welcome that deliberate focus on access and the ultimate delivery of HAF.

[Alex Ruff, Conservative, Bruce—Grey—Owen Sound, ON]

Thank you.

My next question will go to three of the witnesses, Mr. Armstrong, Mr. Lee, and back to you, Mr. Rubinstein, as well.

I have another co-operative, Glassworks, in my riding. It's in the process of building not-for-profit, affordable and sustainable multi-generational housing, which is encompassing business opportunities and everything that's needed. However, they're running into some challenges. It's maybe more on the municipal level with respect to rezoning and the charges that the municipalities are levying against these not-for-profits.

However, it's not just that. I have other developments in the area where they run into challenges with the conservation authorities. They're delaying the process. These are all things where we fully acknowledge the need to make sure we're not doing damage to the environment, etc., but once they've been through that, it's the delay and the impact that has.

I'd like all three witnesses' take on that.

We'll start with Mr. Armstrong, on the co-op side, please.

[Thom Armstrong]

Whether you're developing a non-profit co-op or a high-end, purpose-built rental or strata, the cost of development and the impact of development costs are the same.

I'll give you one concrete example. The City of Victoria, just in the last month, adopted a very progressive zoning policy that eliminates the rezoning and public hearing process for an affordable housing development that's consistent with the official community plan and local design guidelines. For a project that we have under way in Vancouver, the redevelopment of a 31-unit housing co-op, had that policy been in place in Vancouver when we began the development process, it would have saved us nine months—and the cost of money for that nine months—roughly $650,000 in capital costs, given the increase in construction and interest rates and other soft costs, and it would have reduced the day-one rents in that redeveloped co-op by $200 a month on average.

There's a very tangible example of the impact that, what would seem to be, quite minor improvements in the rezoning process has on the costs of an affordable housing development. That's just one example among many. Everything you do to add time or money to a new or redeveloped housing project, whether it be a co-op or a non-profit—

[Alex Ruff, Conservative, Bruce—Grey—Owen Sound, ON]

Thanks, Mr. Armstrong.

I want to get Mr. Lee in here.

Can you expand a bit?

[Kevin Lee]

Yes. We need as-of-right zoning, so that once something is zoned for a specific height, it can go through and not face all kinds of additional processes. We need height in zoning that is realistic and not as a starting negotiating point, after which the city will seek to extract more dollars for every additional storey that goes on. Let's figure out what the height is supposed to be and then let the development community respond to that.

To the point on development taxes, there's a perfect example. Who should be paying for affordable housing? The entire tax base will. By waiving development taxes, you'd be able to create the difference in many cases for creating affordable units, rather than trying to put it on the backs of new homebuyers.

Hopefully that covers a few of your areas.

[Alex Ruff, Conservative, Bruce—Grey—Owen Sound, ON]

Thank you.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Ruff. Your time is over.

We will now go to Mr. Collins for five minutes

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

Thanks, Mr. Chair.

Thanks to all of the witnesses for attending today.

At the outset when I presented the motion to committee, my goal or objective was purpose-built rentals, that is, affordable rentals for families.

One thing I've learned over the years is that, as we have witnessed, both the private sector and the three levels of government try to assist with the affordable housing crisis that face. Many of the units, if not most, are bachelor and one-bedroom units.

What's left behind are those families who sit on affordable housing wait-lists across the country and who may have two or three children and require something more than a one-bedroom or bachelor unit.

My first question would be for Mr. Armstrong.

You talked about incentivizing the partnerships. How do we incentivize for larger units for families who might be struggling with affordable housing issues across the country in whatever province they live in and with whatever affordable housing wait-list they're on?

[Thom Armstrong]

Well, the short answer is that you need to be prepared to invest enough money in capital and operating subsidies to plug the equity gap.

In our community land trust, 40% of the new homes we develop are either two- or three-bedroom homes intended for the families you're speaking of, who generally can't find an affordable place to live in private sector developments.

It's just not economic, so there needs to be an investment to plug that gap to make it economic and make it consistent with the mission of the non-profit or co-op developers.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

Thanks, Mr. Armstrong.

I have a subsequent question. The second bullet point you mentioned was to “free up land”.

For me, that's a key point. I know that the City of Hamilton is anxious to receive resources from the federal and provincial governments in terms of resources to purchase land in order to forge partnerships with either the private sector or not-for-profits.

What benefit would come to you and your organization and other non-profits in B.C. and elsewhere with the provision of land?

[Thom Armstrong]

It's absolutely critical. I would say that seven or eight years ago we could have said that free land was enough to to generate the viability you need to create significant affordability. That's no longer the case.

We developed four sites made available to us by the City of Vancouver on 99-year leases for $10 each. We've built 358 homes on those four sites, all coming in at around 65% to 68% of market rents in year one and getting more affordable over time. That's the impact that investment in land can have.

I would say to municipalities: Never ever sell your land—ever. Make it available on advantageous lease terms to community housing developers. They will deliver the affordability you need, not just for five years or 10 years but forever.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

Thanks for that.

My subsequent question would be about the whole issue of how the money flows through to those who are applying for it. I'm from Hamilton, and I know that our complaint was that it took us a very long time to receive the funds from CMHC as it relates to the national housing monies that were made available to us through the co-investment fund.

How do you envision this fund operating in that regard to ensure the money flows very quickly and gets to those who are applying for it in a timely way, so that those units can be constructed almost immediately?

[Thom Armstrong]

I think the answer is in the question: Those funds have to flow immediately.

The two things that community housing developers need to have access to are, first of all, risk capital, and, second, patient capital. As I've said in another conversation, CMHC at times is a lot of use in the kinds of developments that we need to have under way. As long as you're pre-qualified and you've met what I hope are quite stringent underwriting conditions for a new development, that money has to flow early in the process so that you're not left—especially as a non-profit developer—with all of the assets you have at your disposal at risk.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

Thanks, Mr. Chairman. I think I have about 30 seconds left.

My last question would be on the criteria, Thom, that could be applied to the application process.

We've heard from many of the witnesses today about transit-oriented development; possibly inclusionary zoning, depending on what criteria are included there; and higher densities, of course, in urban areas where that makes sense.

Do you have any others to include on that list in terms of what the government should consider attaching to the funds?

[Thom Armstrong]

I agree with all of those. I would add family-sized housing, housing appropriate for families, and permanent long-term affordability.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

Thank you.

[The Chair, Liberal, Bobby Morrissey]

As you can see, committee members, we're approaching 5:30, but I get a sense of agreement that we'll proceed to conclude this round, which would mean that we would go to Mr. Trudel for two and a half minutes and then to Madam Zarrillo for two and a half minutes, Madam Kusie for five minutes and then Madam Martinez Ferrada for five minutes.

Do I have agreement to continue like that? I know that the witnesses are available.

Okay. Go ahead, Monsieur Trudel.

[Denis Trudel]

Thank you, Mr. Chair.

I will ask a question, and I will then let Mr. Morrice, of the Green Party, have the last minute of my time. I will try to be brief.

Mr. Rubinstein, we talked earlier about the rapid housing initiative, a program with a proven track record. It works well and it is fairly quick. It was even a bit too quick for some organizations, which struggled to submit their projects within the set time frames. The initial funding for that program was $1.5 billion, and an additional investment of $1.5 billion was just announced, but you asked for $7 billion because projects worth $4 billion have been submitted. That proves that the program is good and that the needs exist.

Don't you think that fund should be maintained, as it is a program that creates social housing and really helps the people most in need?

Instead of investing in programs mainly intended for private developers, should we not promote those kinds of programs that support non-profit organizations?