Human Resources Committee on May 16th, 2022

[The Chair (Mr. Robert Morrissey (Egmont, Lib.)), Liberal, Bobby Morrissey]

Good morning, committee members.

We will begin the 24th meeting of the House of Commons Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities.

Today's meeting is again taking place in a hybrid format. Witnesses and some members of the committee are appearing virtually.

I would ask those who are appearing virtually to speak slowly for the benefit of the interpreters who are providing interpretation services for this meeting. If at any time there is a disruption in interpretation, please notify me, and I will suspend while we get it clarified.

I also remind members attending in person to respect the health protocols that have been established by the House of Commons committee on proceedings.

I would also ask all members of the committee to address their comments through me, the chair, by using the “raise hand” icon if you are appearing virtually and want to get my attention. For those in the room, simply raise your hand.

We will begin today's meeting by hearing from three witnesses on the housing accelerator fund study that we began on Thursday, February 3.

To each witness appearing, you have five minutes to give your presentation, and I would ask you to stay within the five-minute period.

From Blue Door Support Services, we have Michael Braithwaite, chief executive officer. From Société d'habitation populaire de l'Est de Montréal, we have Jean-Pierre Racette, manager; and from the Neighbourhood Land Trust, we have Joshua Barndt, executive director.

I will begin by calling on Mr. Braithwaite for a five minute opening statement.

[Michael Braithwaite, Chief Executive Officer, Blue Door Support Services]

Thank you very much. It is a pleasure to be here to speak about this very important study.

My name is Michael Braithwaite, I am the CEO of Blue Door. Blue Door is an organization in York Region. The population of York Region is about 1.1 million people, and on any given night, about 1,500 people are experiencing homelessness.

Blue Door has been around for about 40 years, and for the first 35 years we were focused on reacting, in a sense, just with emergency housing or shelter. We are the largest emergency housing provider for men, families and youth in York Region.

Over the last five years, we've pivoted a little bit to not only providing emergency housing but of course also looking at short-term and long-term affordable housing with wraparound supports. We have a housing-first approach with rent geared to income, along with those wraparound supports.

We've created a lot of housing through innovative thinking, and as everyone here is aware, it's a tough time. We're in a bit of a housing crisis, especially for our most vulnerable. We've done that through innovative thinking and leveraging private donor funds to create sustainable, affordable rental housing for seniors, families and 2SLGBTQ+ youth.

We've repurposed vacant and broken down housing with Parks Canada. They have 44 vacant homes in Rouge National Urban Park. We took one of those homes. We used our construction social enterprise to rebuild it, and it is now a duplex that will have truly affordable rents for the next 30 years, so it has a purpose as well.

Blue Door has used funds from Reaching Home and private foundations to purchase a fourplex—

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

Mr. Chair, we aren't hearing the interpretation.

[The Chair, Liberal, Bobby Morrissey]

Mr. Braithwaite, could you hold for a moment, as we're having an issue with the interpretation.

We going to suspend for a couple of minutes while we get the technical issue clarified.

[The Chair, Liberal, Bobby Morrissey]

We will resume. I'm sorry about that.

We will proceed to the second witness, Monsieur Racette, for five minutes.

[Jean-Pierre Racette, Manager, Société d'habitation populaire de l'Est de Montréal]

Good morning.

I first want to thank you for giving us the opportunity to share our viewpoint with you on the issue of housing acceleration in Canada. I'll discuss this issue from an angle that will undoubtedly be a bit different from the other witnesses.

Like all of you, we feel it's important to quickly and considerably increase the supply of housing, particularly in large urban centres, which are experiencing a long-term housing shortage, particularly affordable and social housing.

That shortage destabilizes economic development. Among other things, it reduces the supply of housing for low- or moderate-income workers, who need to move further from their place of work, thus increasing travel time and greenhouse gas emissions. It also has devastating effects on the most vulnerable households, more and more of whom will end up in the street due to a lack of housing. In addition, those households are made up not just of people with mental health or addiction problems. Large urban centres will be required to manage social crises related to structural homelessness.

I note that our organization works in Montreal. Since our analysis was conducted based on urban centres, it would probably differ slightly for less populated areas.

Building numerous affordable and social housing units is a key objective. Many stakeholders will tell you various ways of addressing this complex problem, based on their perspectives and their interests. For my part, I'd like to draw the attention of the members of this committee to another issue of common interest that we feel is overlooked and that, in our opinion, is a blind spot in the current process of accelerating housing construction. Construction must certainly be accelerated, but the sustainability of new housing must also be ensured. In addition, the opportunity must be taken to structure the affordable housing sector in Canada so it's more efficient and more financially self-sufficient. Following are some issues related to the sustainability and structuring of the sector.

Once the 100,000 new housing units are built, a substantial number of which must be affordable enough to meet the most pressing needs, they must remain affordable, their quality must be maintained and they must be well managed. However, experience over the last 40 years shows that the issue of sustainability is far from being considered. Indeed, the basic assumption is that, if the funding needed to carry out a housing project is secured, the housing development will magically be well managed over the long term, which will ensure its sustainability and affordability.

Why then, you would ask, must we worry about long-term management of affordable housing stock? There are various reasons, which I'll list.

First, real estate management is very complex, particularly in a large urban centre where social dynamics can become extremely difficult and complex.

Second, managing complexity requires expertise and specialized skills. Those skills require high salaries and organizations with teams that are able to retain that competency. Also, paying those salaries, especially in large urban centres like Montreal, Toronto and Vancouver, requires large social enterprises that can assume the inherent costs of that competency. All this is even more true in the context of a major labour shortage, which requires significant salary adjustments to deal with competition from all the other companies that are also looking for skilled labour.

Finally, I must note that it's the large competent companies that will find it easiest to innovate and adapt their activities to housing needs and the evolution of our environment, which is transforming faster and faster. A case study of about 15 non-profit housing organizations in Canada, conducted in 2015 by Housing Partnership Canada, highlighted the major challenges that await the sector in terms of organizational capacity, sustainability and innovation.

We therefore have a unique opportunity to structure the affordable housing sector in Canada over the long term and promote the development of independent financial capacity by channelling responsible funding and government funding toward solid organizations. In large urban centres in Canada, there are somewhat larger organizations that focus on development. However, to be competent, have the ability to take on a considerable number of new housing units and attract responsible funding, they must absolutely be much larger. Economic analyses refer to a threshold of approximately 2,500 housing units for an organization to be competent and viable.

We want to highlight to the members of the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities that this a unique collective opportunity to make the affordable housing sector in Canada's large urban centres stronger and more independent. This can be done while pursuing the objective of building 100,000 housing units.

I note that small urban centres also have challenges. It's not a matter of pitting small urban centres against large urban centres, as they complement each other. That said, the problems in large urban centres are extremely pressing.

With that in mind, and given that we have five minutes, we're making the following recommendations.

As part of the accelerated construction of these 100,000 housing units, particularly in large urban centres, where a large number of those units will be built, we recommend that priority be given to organizations that already have a large number of housing units and the expertise to foster the sustainability and affordability of those new units.

We also recommend encouraging closer ties or integration among these large social enterprises in order to accelerate their development and to bring them closer to the organizational threshold capable of supporting sustainable expertise.

With that sector consolidation in mind, including by consolidating the strongest actors, funds for organizational development must be provided to support this transition.

In that way, the strongest organizations with very large real estate stocks could be more qualified for more independent funding in the area of responsible funding. I am thinking of labour-sponsored funds, charitable foundations and pension funds.

In closing, I'd like to tell you about us. The Société d'habitation populaire de l'Est de Montréal, often called SHAPEM, is a social enterprise founded 34 years ago, in 1988. We are responsible for a housing stock of approximately 1,750 units in about 100 buildings, 1,000 of which are owned and 750 that are managed for non-profit organizations.

Of those 1,000 units that are owned, approximately 40% were built without assistance from government programs, through patient venture capital providers, such as the Fonds de solidarité FTQ, the Lucie and André Chagnon Foundation or religious communities.

[The Chair, Liberal, Bobby Morrissey]

Mr. Racette, could you conclude? We've gone well over the five minutes.

[Jean-Pierre Racette]

Okay. I'll finish the description of our organization.

Our owned assets total close to $150 million. Our managed assets total $150 million, and our assets in development total $100 million. We're active in seven boroughs in Montreal, and our work team is made up of 45 people.

Thank you very much.

[The Chair, Liberal, Bobby Morrissey]

Thank you very much, Mr. Racette.

We'll now to go Mr. Barndt from the Neighbourhood Land Trust, for five minutes, please.

[Joshua Barndt, Executive Director, The Neighbourhood Land Trust]

Hello, honourable members. Thank you for having me here today. My name is Joshua Barndt, and I'm honoured to present on behalf of the Neighbourhood Land Trust.

I am coming to you here today from the neighbourhood of Parkdale in Toronto. The Land Trust owns 85 buildings, with 205 units of affordable rental housing. Our primary strategy for producing affordable housing has been to acquire existing rental housing and convert that housing to permanently affordable rental housing.

Over the past years, our organization and others have struggled to access funding through the national housing strategy to support this work.

I would like to speak to you today about the crisis of increasing unaffordability of rental housing stocks, and how we believe the accelerator fund could respond to this. In order to contextualize our recommendations, I'd like to share the housing affordability challenges that residents in our community are experiencing.

First, in south Parkdale 11,000 households are tenants. This represents 87% of residents. As Toronto experiences a housing affordability crisis, a large majority of local residents experienced a crush of market-driven rent increases, evictions and displacements. In 2021, our organization undertook a neighbourhood-wide research study, looking at the changes in affordability of the rental apartment building sub market, consisting of 68 private rental towers with a total of 6,060 units. Our research documented a troubling trend of consolidation of ownership of this housing stock by financialized landlords, with 71% of units currently owned by large corporate landlords and REITS.

Among many extractive business strategies, the acquisition of low-end market rental housing and the subsequent rent increases of asking rents in these buildings is integral to the financialized landlords' business strategies. This is translated into the prevalence of aggressive above-guideline rent increases and eviction applications. The advertised rents in south Parkdale increased dramatically from 2015 to 2018 by 36%.

In 2018, none of the large landlords offered units for less than $1,400, a rent level 40% higher than the CMHC average rents for the area. These dramatic rent increases and eviction threats have destabilized the everyday life of tenants, 50% of whom live below the poverty line, the majority of whom are BIPOC residents and immigrants. Above 50% of our survey respondents, tenants living in these buildings, now live in severely unaffordable housing by spending more than 50% of their income on rent. In addition, tenants have faced increased financial burden with 40% disclosing an inability to pay for medicines and food that they require.

What is a tangible solution to secure and maintain the affordability of rental housing stocks? Through jurisdictional research and consultation with tenants, community organizations, housing experts and municipal government officials, we've identified that the most effective means of preserving and producing as well as maintaining the affordability of rental housing stocks is the acquisition of private rental housing by the public or non-profit organizations, and the conversion of these properties to permanently affordable rental housing.

It is important to note that the acquisition of rental housing was a key strategy utilized to produce co-op housing from the 1970s to 1990s. Unfortunately, the national housing strategy has failed to support the acquisition of rental housing, the most rapid and cost-effective means of securing permanently affordable housing.

A national acquisition finance stream is direly needed as part of the housing accelerator fund. Countless advocates have already proposed such a program. FCM's 2020 white paper coined “COVID-19 and housing: Critical need, urgent opportunity” proposed, as one of two goals, to acquire and protect modest-rent market housing. FCM specifically identified that the federal government has an opportunity to empower community housing providers and their municipal partners to purchase existing, relatively affordable private rental housing at a much lower cost than building new affordable housing. While this goal has not yet been realized, it's not too late to act.

Why is an acquisition program a really good idea? Given today's high land cost and construction costs, preserving the existing supply of affordable rental units is faster and more economical than building new affordable units. Acquisition projects are an economically efficient way to secure the supply of rental housing, costing 30% to 60% less than new construction projects. Lower cost, of course, means more units are produced through public investment. Because the buildings in question are already integrated into the neighbourhood fabric, preserving rental housing supports government policy objectives of maintaining the stable and well-served mixed income neighbourhoods while reducing neighbourhood disruption caused by new construction. Acquisitions also curb the flow of vulnerable tenants into homelessness. For existing tenants, their housing becomes secure and remains affordable. In addition, as units are made available and turn over, acquisitions accelerate access to affordable housing for those on affordable housing waiting lists and in shelters.

I am almost done, so thank you for your time.

What is needed for an acquisition program to work through the accelerator fund? Canada needs a funding program that is a hybrid of the CMHC co-investment fund and the rapid housing initiative. This program must include, one, low-interest financing similar to the NHS co-investment program and, two, capital grant or forgivable loan funding similar to RHI. However, where RHI projects in Toronto required $350,000 to $600,000 per unit to produce, an acquisition project would require one-third of that, at $100,000 to $250,000 per unit.

Number three is that funds need to flow rapidly as acquisition projects move at the pace of the market. The City of Toronto has exemplified a means for governments to disburse funds rapidly for acquisition through a new multi-unit acquisition program that they called MURA. The NHS should consider a similar program design or simply provide the funds to municipalities to disburse locally and rapidly. I think this committee could consider providing those funds directly to municipalities and encouraging municipalities to produce programs similar to that of the City of Toronto.

In conclusion, the Neighbourhood Land Trust seeks to advise the committee that the most effective means for the federal government to accelerate the availability of affordably housing is to support public and/or non-profit acquisition of rental housing properties through a federal acquisition program funded through the accelerator fund.

Thank you so much for your time, and good luck on this very important task.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Barndt.

We'll now open the floor for questioning, beginning with Madam Kusie for six minutes.

I will advise witnesses that I will be following the timeline and therefore will interrupt and ask you to conclude so that we get to as many members as we can.

Madam Kusie, go ahead for six minutes.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you, Chair.

Thank you, witnesses, for being here today.

Mr. Barndt, I'm sorry but I didn't understand something. Exactly where does your funding come from currently to purchase these units? It wasn't clear to me from your introduction.

[Joshua Barndt]

Currently we depend on two streams of funding for the acquisition of rental housing. One is municipal grants. One initial project was undertaken through section 37, which was funding received by the municipality through development bonusing. Now the City of Toronto has created the MURA program, which provides access to grant funding from the city, so we apply to that program now through a formal application.

In addition, last year in the absence of either a municipal, provincial or federal program, we raised investment from nine foundations—impact investors—who provided us short-term financing to acquire a building and get it off the market to ensure that we could preserve that affordable rental. Nonetheless, that impact investment really provides gap financing, not long-term funding or financing, so we need a government solution—a government program—to provide that support.

The other thing I'll say is that we did seek to put projects together through the RHI program and we had three unsuccessful applications partially due to the fact that RHI excluded the acquisition of rental housing unless that rental housing was fully vacant or dilapidated, which in our mind was really an ineffective qualification because in fact we want to buy the better buildings—the buildings that are tenantable, that are in good condition and that can provide good housing.

One of the things we hear a lot from naysayers of acquisition programs is that we need to produce housing that is vacant so that we can move people out of shelter into that home. What we find is that, because of the natural turnover in rental housing, we actually have access to a lot of housing. So in the time it would take to build a building—two to three years—we can actually have enough vacancy to produce that flow and bring people into housing at a rate similar to that for new construction projects. In fact, because those buildings are non-profit owned and linked to access plans from the City of Toronto's affordable housing wait-list, we provide ongoing access to housing, moving forward, as well for those in need.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

How would you say that inflation has impacted housing affordability, and what do you think would help your tenants and these foundations to mitigate the impact of rising inflation in Canada and its impact on your land trust?

[Joshua Barndt]

That's an incredible question. It's very important.

I can tell you that we had a building that we were seeking funding for from the City of Toronto, and we had a business plan to acquire that building. About six weeks ago, we required $4 million in capital funding to make that project work—it was a 36-unit building—and we could finance the rest.

Just in the last six weeks, rates have increased so significantly, and the 10-year terms offered by banks have escalated by about 2 percentage points by now. While the government's rates have increased only a little bit, the 10-year terms that banks are offering have escalated by about 2 percentage points. That meant that our capital requirement for investment, grant funding, increased by over $1.4 million to $5.4 million. The interest rate escalation is significantly impairing our ability to finance these projects, and it translates to a higher need for capital funding.

On the one side, while interest rates are higher, we're going to need more capital grant funding. In addition, non profits continue to need access to low-interest financing through CMHC. That is going to continue to be extremely important to assist with our work.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Similarly, how would you say that the challenges around supply chains and labour shortages have impacted your land trust?

[Joshua Barndt]

Thank you also for that question.

We do not build new housing; we acquire existing buildings. We benefit from the fact that those buildings exist already, so our projects are not slowed down by supply chain issues. We can acquire those buildings today. Of course, once you own a building, especially a building that might be a little bit older, there's a need to renovate those buildings, to improve them and repair them over time.

Of course, we are experiencing some cost escalation due to supply chain needs and labour shortages. The benefit of having a tenantable building on day one is that you can plan for those repairs over time. In many cases, especially when we're purchasing better buildings, we can provide affordable housing to those who need it while we experience those delays in securing the labour and getting the additional funding and financing to afford the repairs.

We're finding that we can continue to provide the benefits to the city and to residents of Toronto, even with these shortages. Of course, they can slow our work down a bit, but in an acquisition context, they have less impact than they would with new construction projects, which are experiencing huge cost escalations and huge delays.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Madam Kusie.

We'll now move to Ms. Martinez Ferrada for six minutes.

[Soraya Martinez Ferrada, Liberal, Hochelaga, QC]

Thank you, Mr. Chair.

My question will be for Mr. Jean-Pierre Racette.

Thank you, Mr. Racette, for your presentation today. Indeed, we see a lot of gentrification because rents are becoming more and more expensive and people are living further and further away, and that can have an impact on climate change.

I'd like to come back in particular to the issue of funding. You talked a bit about it at the end, but you ran out of time. Today's study is about how we can ensure that the housing accelerator fund will in fact support the rapid creation of housing units.

Do you believe that a fund like the one that was created to quickly address the COVID‑19 pandemic could more quickly distribute funds to current projects?

Could you talk to us about the context surrounding funding? How can we better support you?

I must tell you that you only have one minute to answer, as I'm sharing my speaking time with my colleague, Mr. Collins. I know you well, so don't go on too long.

[Voices]

Ha, ha!

[Jean-Pierre Racette]

Okay.

Indeed, it is important for the Canada Mortgage and Housing Corporation, the CMHC, to be able to make investments like the ones it made in this fund, but they could be combined with others. I'm more familiar with Quebec than the other provinces. We had a lot of help from the Fonds de solidarité FTQ and the Lucie and André Chagnon Foundation before the funds were available.

When an opportunity arises, it needs to be seized quickly. I fully agree with Mr. Barndt. Opportunities need to be seized. In the short and medium terms, it's important to partner with organizations like the Fonds de solidarité FTQ, religious communities and large foundations to make funds available. We've done several projects that way. Then there's the issue of longer-term funding, interest rates and financial balance. That's something else.

[Soraya Martinez Ferrada, Liberal, Hochelaga, QC]

Do you do all that through existing funds?

What about municipalities?

[Jean-Pierre Racette]

It's also true for municipalities. The problem is that quick action is needed. There's also the whole issue surrounding entrepreneurship.

The management of public funds imposes some constraints. More flexible funds are needed at the outset to get off the market long enough to properly analyze public funds, investments.

In Montreal, the analysis of projects can take a year or a year and a half. Buildings or lands cannot be held for a year and a half when there are offers to purchase. That's impossible at the moment.

[Soraya Martinez Ferrada, Liberal, Hochelaga, QC]

They need to be planned better.

Thank you, Mr. Racette.

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

Thanks, Mr. Chairman. My quick question will be to Mr. Barndt.

Joshua, last week, we had Ms. Abi Bond from the housing secretariat in Toronto. She referenced the MURA program and talked about, as you have this morning, the importance of flowing the funds as quickly as possible to municipalities and service providers to ensure that we avoid some of the issues that Ms. Kusie raised earlier about rising interest rates and inflation issues.

Can you expand upon the MURA fund and elaborate on the importance of flowing the funds quickly to non-profit service providers and municipalities?