Human Resources Committee on May 16th, 2022

[Joshua Barndt]

Thank you so much for the question.

Our organization has been working to acquire rental buildings for many years. Prior to partnering with the City of Toronto, we experienced 17 failed acquisitions due to the fact that there weren't appropriate programs to support our work.

The MURA program came out of collaboration between the City of Toronto and non-profits such as ours, which saw the acquisition of rental housing as important. There was a pilot program in 2019, which is evaluated, and our organization accessed funds through that pilot program.

That pilot program was successful, and the city now has matured that pilot program into an ongoing program. What it provides is a two-stage RFP process. There is a two-stage review process. The first stage is a pre-review of the organization, so ensuring that the organization is financially sound, that it has an appropriate strategy and operating and acquisition experience. Then that organization can be pre-approved to go out into the market and bid on buildings for a pre-approved amount of funding per unit.

That enables the organization to provide an offer on a building, knowing that it has access to funding quickly. Once that organization finds that building and puts the business plan together, undertakes a due diligence, they send out a package to the city. The city commits to reviewing and approving or denying that fund on an accelerated basis—I think it's 30 days.

That allows an organization to go and compete effectively in the private market and actually participate respectfully in the private market. Non-profits often have to pull together a lot of different complicated funding and financing to make a project work, and they're convincing a private owner to be part of that deal. When we go with what we need, it means that we're respecting the way the market works and we're working well with the private sector to transition that housing to a long-term ownership with affordable rents built in. This program is great in that way.

It also provides a few additional pieces of funding that are key to making this work. It provides deposit funding so—

[The Chair, Liberal, Bobby Morrissey]

Mr. Barndt.

[Joshua Barndt]

—that you only need a bit of money to put down a deposit, as well due diligence funding.

Thank you so much.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Barndt.

Ms. Chabot, you have the floor for six minutes.

[Louise Chabot, Bloc, Thérèse-De Blainville, QC]

Thank you, Mr. Chair.

I want to thank the witnesses for their comments and their expertise in relation to the two large cities. We know them well, but personally, I know Montreal better.

We are at the front end of the process for the new fund. In concrete terms, how can we ensure that the fund is significant?

The new fund proposes 100,000 new housing units by 2024–25, or $4 billion over five years. Last week, a witness said that funding should be accelerated—the $4 billion expended more quickly—because construction and acquisition take so long. He also said that there needs to be project-based funding.

Do you feel that those solutions are appropriate?

My questions are for both witnesses.

[Jean-Pierre Racette]

We need to understand that the situation is complex. In the last two projects we carried out, we were dealing with heritage issues. They were heritage buildings, magnificent buildings with land. However, we needed a year and a half to two years for the entire process. There are limits, regulatory procedures, that can't be avoided.

Funds must be available quickly to get the buildings off the market. It's essential to pre-allocate funding. For us, things don't work in the way described by Mr. Barndt. We operate more with funds other than municipal funds, initially, and then we turn to the city.

We must also talk about organizational capacity. Building 100,000 housing units in three years is no small task. I put a lot of emphasis on organizational capacity. Everyone involved with non-profit organizations will reach essentially the same conclusion: long-term funding and community support are needed. Organizational capacity, competence, is essential.

I'm not entirely answering your question, but these points need to be raised. As I said, it's no small task. Construction time frames must also be considered. Existing buildings can be purchased, but since more and more people need housing, construction must also be considered. If all existing properties are eliminated, the middle class will not be able to find housing.

[Louise Chabot, Bloc, Thérèse-De Blainville, QC]

Thank you, Mr. Racette. You're right.

Now, I'd like to hear from the other witness.

[Joshua Barndt]

Thank you so much.

The City of Toronto this year has put $20 million into the MURA fund. If we assume that the top amount allowed per unit, $200,000, is provided for those projects, that would produce 100 units. If the City of Toronto, for example, received $200 million or more from the federal government, we could exponentially increase the number of units that could be produced.

I think quick funding of municipal programs, where those municipal programs exist, would create a quick impact. You're correct to say that, as we are seeing escalation in interest rates, the sooner we act, the better. In addition, I think as we continue to see both the pressure of COVID and the economic pressure on vulnerable people as well as on rents, we could see an escalation of the homelessness crisis. Therefore, the faster we act, I think the more likely we can sort of curb that increase in the homelessness crisis and ensure that people are in secure housing.

I think, of course, that putting out money soon would be very beneficial.

Then, as was said earlier, I think it also would be important to sustain it for some period so that projects could come together over time. Projects aren't always possible today. Sometimes in two months, three months or a year, additional or alternate projects, great projects, can come forward.

Having a program with sustained funding that allows proposals together over multiple years would be beneficial.

[Louise Chabot, Bloc, Thérèse-De Blainville, QC]

I agree that 100,000 housing units is a lot. However, it must be remembered that that's across Canada. If that goal is reached within the set time, as the government wants, how can it then be assured that the units will remain affordable?

Will the definition of affordability need to be reviewed?

[The Chair, Liberal, Bobby Morrissey]

We can have a 10-second answer.

[Joshua Barndt]

Sure. It's very important that capital funding and low-interest financing provided by the federal government go to housing models that have a specific commitment to long-term affordability. Those include co-ops, non-profit organizations, public entities and community land trusts. We need to be looking at affordability periods of 49 years at a minimum. People need housing for the long term, and we've invested much too much money in short-term affordability. It's a good deal for governments to do this as well, because of course the public money put into projects will produce longer-term public benefit. That funding is better used when invested in projects for which there are long-term affordability requirements and commitments.

Thank you.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Barndt.

Thank you, Ms. Chabot.

Now we go to Madam Zarrillo for six minutes.

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

Thank you, Mr. Chair.

I want to thank both of the witnesses today. This testimony is so important. It is my wish that this testimony gets the government thinking differently and reframing how the accelerator fund actually could also promote purposeful, rental-stable, already built housing.

My first comment is that the accelerator fund cannot incentivize the financialization of housing. I would ask Mr. Barndt about the Ready Now model, the purpose-built rental that could create the right supply more quickly.

My question is for Mr. Barndt, and then, if there's enough time, I would also like to hear from for Mr. Racette. How much time can be saved, how much less expensive can it be to build them and how many more units could we get if we spent a little more of our focus on the already built housing units, purpose-built rental?

[Joshua Barndt]

Thank you so much.

Our analysis in our community is quite clear that for the acquisition of an existing rental unit the costs come to around $200,000 to $300,000 per unit. To produce the same unit new would cost between $450,000 and $600,000 per unit. The costs are significantly more.

In addition, the timelines are significantly faster. We can identify a property that's for sale, get a deal, undertake due diligence and acquire that building within a three-to-four-month period, whereas in new construction projects we're looking at a minimum of a two-year period. Even with the rapid housing type of projects, they have generally been delayed and are taking one and a half to two years.

We can act much quicker. Of course, if the cost of the projects are lower, what it means is that with the government funding we have, we can produce more units.

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

Mr. Racette?

[Jean-Pierre Racette]

First, the strategy is to get as many units off the market as possible over the short term. To do that, funds are needed.

Second, we can wait for two, three or four years. We've acquired buildings in the past, and it took 20 years to make them into subsidized housing.

Funding must be available to get through the transition period, which can be quite long. Right now, in Montreal, it's mostly affordable housing units, for which the rent is lower, that we want to take off the market—I will use Mr. Barndt's logic—and they will sell at a price that will significantly raise market rents. Currently, low-rent housing units are being acquired by people who find a way to evict residents and raise the rents by $200, $300, $400 or $500 per month. The problem is that, if they're on the market—because they are on the market in these cases—funding must be negotiated and maintained to make up the difference in rent, which will not be enough to cover operating costs, as though they were on the market. For instance, suppose rent is $500 more per month, $200 or $300 is needed per month to cover that difference in costs. Prices in Toronto, Montreal and Vancouver aren't the same, but the logic is the same.

As for our rents, an affordable three-and-a-half room apartment costs $700 or $800 per month. However, if the building is put up for sale, that unit will then rent for $1,200. The financing package and analysis will require an increase in funding to get through that period. Over the long term, it will become advantageous. When our buildings are taken off the market—we do it often—the funding is not proportional to the costs.

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

I'm sorry. I'm going to interrupt, Mr. Racette, because there's so much more that I want to hear about from both of you.

I know my time is running out. I have always wanted to probe into this operating agreement and the problems with the legacy operating agreements in housing. If possible, if there's any written submission that both of you could send to the committee, that would be wonderful.

Mr. Chair, can I also ask Mr. Barndt if we could get a copy of the study done out of Toronto that he spoke of?

Could I get that as well, Mr. Barndt? I would like to share it with my cities in my riding.

Is my time up, Mr. Chair?

[The Chair, Liberal, Bobby Morrissey]

No, you have a minute and 10 seconds.

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

I still have a minute.

What is the number one thing we need to do to make sure this fund does not incentivize financialization of housing?

I'll ask Mr. Racette and then Mr. Barndt.

[The Chair, Liberal, Bobby Morrissey]

We need short answers.

Mr. Racette.

[Joshua Barndt]

Mr. Racette, shall you go first?

[Jean-Pierre Racette]

I'll try to answer the question correctly.

At this time, there's a lot of capital to remove housing units from the market. Adding capital to remove units from the market will lead to an increase in prices. Regardless, going against the market isn't possible. To reduce pressure, 400,000 or 500,000 additional housing units would be needed in Canada all at once. It's very difficult because, at this time, going against the market isn't possible. It's a race to remove from the market what gives the best chance of maintaining affordable housing. It's hard to not follow existing funds that remove housing and that cause rents to double.

I have no magic answer for you, but it seems hard to me.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Racette.

Mr. Barndt, you probably can answer that in follow-up to a question from another committee member.

We're going to Ms. Gladu for five minutes and to Mr. Coteau for five, and that will conclude the first group of witnesses.

Ms. Gladu.

[Marilyn Gladu, Sarnia—Lambton, CPC]

Thank you, Chair.

Thank you to our witnesses for appearing.

We see that there is an affordable housing crisis across the nation, but in every place, whether it's an urban place or a rural place, there are different needs to address that problem. It's my view that the municipalities.... For example in Sarnia-Lambton, we have a five-year plan. We know what kinds of affordable housing we need to get and how we can provide for those who are lower income, address homelessness and all of these things. I'm sure other municipalities are similar.

It's my view that what the federal government ought to do is directly fund the municipalities, because then they know the organizations that are there that are doing the good work on the ground and they can operate at a pace that reacts to the market. I think that's the best way.

I'll ask this to each of the witnesses: Do you agree? If not, how would you recommend we move forward?

[Joshua Barndt]

Thank you so much for the question.

I absolutely agree that municipalities, in being local, have an understanding of the local needs and have collaborations with the partners that they need to work with for success so they can target programs to needs. So, absolutely, providing funding to the municipalities is very import, but, when doing that, it's extremely important that CMHC or the federal government not put strings on the use of those funds or limits on the use of those funds that restrict the kinds of strategies that municipalities want to have but have not been able to have through CMHC funding and financing.

We need to allow the flexibility so cities can decide whether an acquisition of rental housing program is an important strategy. That's what we want to use here. RHI didn't do that. It came with very strict restrictions on the types of projects that were eligible. It limited municipalities, at least in Toronto here, to having the type of strategy it felt was needed.

In fact, we were working with the municipality prior to RHI to secure a building that the city believed would be a great RHI program. We got an agreement of purchase and sale, but then, when the guidelines were announced, we lost that project.

Please don't tie the hands of municipalities by restricting the use too much. It's important to have some form of restrictions to ensure the funds are used well, but respect the municipalities or the experts with regard to what's needed for their residents.

Thank you so much.