Thank you very much.
Good afternoon, everyone. Thank you very much for inviting us to speak to your committee. l'm Darren Kitchen. I'm the government relations director at the Co-operative Housing Federation of B.C.
I think—in fact I know, because he told me so—that Nicholas Gazzard from CHF Canada has already talked to you a fair bit about the history and community benefits of housing cooperatives, so I don't want to bore you by going over all that stuff again. What I'd like to do instead is talk to you a little bit about what it is that CHFBC does and why we do it, and so give some context to some of the main challenges and opportunities that are facing housing co-ops in B.C. and how we are planning to address those challenges and maybe seize some of those opportunities.
There are about 260 non-profit housing co-ops in B.C., and about 90% of those are members of the federation. The federation provides education for co-ops and advocacy for co-ops, but we also provide things like group-buying programs that lessen the expense of roofing, flooring, commercial services, office supplies, and that kind of thing. We also have a pooled investment fund with some of the local B.C. credit unions, which allows co-ops to gain a higher return on their operating accounts than they would usually get on regular chequing accounts. The federation also makes some money from those, because we don't get and don't actually want government funding. So fees from those services and dues from our members are what fund the federation.
Our latest venture is a partnership with Terra Housing Consultants and Vancity, who I believe was here speaking to you earlier today. Social Purpose Development Partners Incorporated is a development company, and it has two main purposes. It's a cumbersome name, but that's the registrar of companies for you—he's a pretty literal-minded guy.
The first of these purposes is to address what I think we all know is a huge need for new affordable housing. That need is key in Vancouver, which I'm sure you've seen in the papers and such. It is one of the most expensive cities on the planet to live in—not only in Canada but anywhere you'd like to go. Condominium prices are sky high. Single-family homes are beyond the reach of all but the very wealthiest. Vacancy rates are low. Rents are rising. And very little new rental housing is being built, for reasons I won't go into here. So affordable housing is a real challenge for families in the lower mainland and Victoria areas of B.C.
That's the kind of challenge that co-op housing has been meeting for a very long time. That's why we started. It's why we do what we do: provide affordable housing to families. We think we have a role in doing that in a challenging market like Vancouver in the future.
We know very well that there's a lot of demand out there for co-op housing. We recently did the Athletes Village Housing Co-op in partnership with the City of Vancouver on the site of the 2010 Olympic village. There are 84 units in that co-op. Before we actually stopped accepting applications—because we were getting so many—we had literally hundreds of applications from people who wanted to live there. So we know there are people who want to live in co-op housing. Through SPDP, the development partnership, we hope to develop more homes to meet that demand and to meet that need for affordability.
Athlete's Village, like most housing co-ops in Canada, is a kind of rental co-op model, unlike Kenneth's equity co-op model. It's purely rental. We'd like to work with other municipalities. What makes the Athlete's Village work is the fact that it is on city land and the city leases the land to us, which reduces the costs and helps to make it affordable.
Vancouver is unusual in having a fair amount of land, and it levers land from developers. Not all municipalities are able to do that.
So to do this kind of model of affordable housing outside of Vancouver, in municipalities that don't have those resources, more help is going to be required. I know that we can't turn the clock back to the late 1970s and have the feds do a big unilateral co-op housing program. Housing is now a provincial responsibility, but I don't think that means the federal government doesn't have a role to play in this. We strongly think that the federal government, in partnership with the provinces and us, should continue to provide support for the development of affordable housing—in B.C., as far as we're concerned, but across Canada, too—and that funding should come in a stable and predictable way. Housing development is a fairly long-term process, three to five years from “we think we can do this” till “we've got it built”. So the funding needs to be stable.
The second major issue we're facing is that the co-ops are getting old. They were mostly built in the mid-1980s, so they're a quarter of a century old, and more. A lot of the critical building systems have a lifespan. A roof lasts 20 or 25 years, that's what it's designed for, and you need to replace it after that. Also, many of the co-ops weren't built to what today we would regard as satisfactory environmental standards. There are a lot of single-pane windows out there in co-op land. It's really energy inefficient.
Planning for these repairs isn't easy. There are a lot of studies, engineering studies, environmental reviews, you name it, that have to be commissioned, paid for, and understood by somebody who knows about these issues. If you need a loan of a few million dollars, that's not necessarily all that easy either. It's not like going to your local credit union, talking to the credit officer and getting a couple of grand to buy a laptop. It's a much more involved process than that.
This is where SPDP comes in, the development partnership. We can help from soup to nuts, from “we know we've got a leaky roof” till “we're fixed”, the whole nine yards. When you think about it, it's a very natural partnership. We have co-ops that need money for repairs. Terra Housing Consultants has a lot of expertise on the technical side of the business and Vancity has money, capital that it would like to use to make high-impact, as they call it, social development loans.
We've hit a bit of a barrier. The best way to refinance these construction projects depends on the co-op. If you're a long way into your first mortgage, just got a couple or three years left or something, it would probably make sense to take a second mortgage on top of the first, pay out the first, and then the first turns into a second, and you get lower. If the loan's big and you've still got quite a few years left on your first mortgage, it makes more sense to roll up the existing mortgage with the new repair costs and finance the thing out over another 20 or 25 years, where the repairs are sufficient to justify that.
Usually a private lender, if you wanted to break the first mortgage and refinance it, would charge you something like a penalty of three months interest. CMHC have taken the position that a co-op exiting its first mortgage will pay a penalty equal to the entire interest that would have been paid on the mortgage, even though the mortgage no longer exists.
I've been doing some math and I'll give you a real-world example. We're working with a co-op that has about four years left in its current mortgage term, and a total of nine years left on the first mortgage. A three-month interest penalty for that co-op would be about $12,000. With four years left, the CMHC penalty to exit the first mortgage would be $218,000. That's about 7.5% of the outstanding balance on the mortgage. Needless to day, we think this is unreasonable. Whatever you think of it, it's certainly not helping the preservation of affordability in Canada's least affordable city.
The last thing I'd like to mention is a challenge that's perhaps more difficult for us in B.C. to address, in terms of forming a company or starting an initiative, and that's the end of the federal operating agreements. With the end of those operating agreements, the expiry of the subsidy that allows the co-ops to subsidize lower-income and modest-income members, this is becoming a growing concern. I've been working with the staff of Metro Vancouver, which is the regional government for most of the lower mainland, and they're very worried about it. I think we need to work together to come to some way to allow the lower-income and modest-income members to remain in their homes.
That's what I came here to say today. Thank you again for listening.