Evidence of meeting #6 for Special Committee on Cooperatives in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was co-ops.
A video is available from Parliament.
Liberal
Mauril Bélanger Liberal Ottawa—Vanier, ON
The reason for that, and correct me if I'm wrong, is that CMHC itself is never a direct lender, except in this case. They were directed by the crown to do so. Is that accurate?
Director, Government Relations, Co-operative Housing Federation of British Columbia
I think so, yes. It's a bit before my time.
Liberal
Mauril Bélanger Liberal Ottawa—Vanier, ON
All right. The example you gave us was a $12,000 typical three-month penalty versus a penalty of $200,000 and some for the full four years remaining on the amount. Do you know the rate of that mortgage?
Director, Government Relations, Co-operative Housing Federation of British Columbia
Yes. It's low because it refinanced recently. I believe it's something like 1.64%.
Liberal
Mauril Bélanger Liberal Ottawa—Vanier, ON
That's where Mr. Butt and I may differ here. Actually I would agree with him that if indeed a mortgage is high, and that's the reason why a co-op is trying to get out of it, to refinance it at a lower rate, somebody is going to have to carry that difference, and I respect that. If it's a closed mortgage, that's a business arrangement and it has to be respected. But in the case where the mortgage rate is low and CMHC could reinvest it at the same or even higher money, therefore the primary lender, whoever the bondholder is, is not affected, all it would need is a directive from the government to do that, correct?
Director, Government Relations, Co-operative Housing Federation of British Columbia
I would hope that somebody could give such direction. I'm not sure of the relationship between CMHC and the government. I know they're a crown corporation, but—
Liberal
Mauril Bélanger Liberal Ottawa—Vanier, ON
Again, it's a matter of sound business principles. CMHC is not a charitable organization, and I respect that. But if indeed it can be demonstrated—and I'm asking you, Mr. Kitchen, perhaps to demonstrate that—that the reason for getting out is not a lower rate, but a higher amount in order to fix the conditions of the houses the people are living in, then surely to God that may be a rationale worth considering and worth acting upon for both CMHC and the government.
Director, Government Relations, Co-operative Housing Federation of British Columbia
I would believe so, yes.
We aren't trying to flee the mortgage for a lower rate. We would actually pay a higher rate to a commercial lender, Vancity, in our case. But it would seem to me that if someone were presented with a couple of million dollars and told to invest it, they should be able to do better than 1.64%.
Liberal
Mauril Bélanger Liberal Ottawa—Vanier, ON
Okay. I think we're clear on that. That, for me to be able to support it, would have to be the case. The attempt is not to get a lower rate from CMHC, but to have a larger amount over a longer period of time to fix the units that have to be fixed. Okay.
The other challenge you mentioned is the end of the co-op agreements. When is the first one coming up?
Director, Government Relations, Co-operative Housing Federation of British Columbia
Some of the first ones have already come up. Some of the early co-ops are—
Director, Government Relations, Co-operative Housing Federation of British Columbia
Mostly they've just carried on as they have before.
Liberal
Mauril Bélanger Liberal Ottawa—Vanier, ON
The people you were concerned about, the ones with lower incomes, have they been able to remain in their units?
Director, Government Relations, Co-operative Housing Federation of British Columbia
To date they have, but none of the older co-ops have yet refinanced their properties to do repairs.
Liberal
Mauril Bélanger Liberal Ottawa—Vanier, ON
Have you got proposals on how to meet that challenge?
I think I may be running out of time soon. You may want to think about that and send the proposals to us in writing so all of us can see what those proposals are and see whether or not we can incorporate them somehow in our report.
Director, Government Relations, Co-operative Housing Federation of British Columbia
CHF Canada will certainly do that.
Conservative
The Chair Conservative Blake Richards
Thank you.
We'll move now to Mr. Lemieux. You have five minutes.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Thanks, Chair.
Thank you for being here this afternoon.
Affordable housing is certainly not my area of expertise, but I do have a couple of questions.
A number of the co-ops that we've had in front of us over these past few days have a business model. Their business model is that their revenue exceeds their expenses, and with whatever is left over there's some that is paid back to members, there's some that's put aside in a reserve fund, there's some that's put aside for rebuilding, improving, and expanding a store perhaps. That's what we just heard the Mountain Equipment Co-op talk about, the witnesses who were just here.
I'm wondering if you could explain the social housing co-op to me. I don't quite understand how it works in terms of revenue coming in, expenses going out, and the long-term plan. Do you pay a dividend to your members? How does that work when you've actually got repairs to do, as you were saying? Could you explain that to me?
Director, Government Relations, Co-operative Housing Federation of British Columbia
Sure.
We don't and can't pay dividends to members. Surpluses go into what's typically referred to as a replacement reserve fund, which is a fund you build up for when you need to do major capital expenses. Those funds don't, and in my opinion shouldn't, fully cover the cost of absolutely everything. No homeowner would do it that way, right? What the fund does is it piles up and it gives you enough equity to take a loan to refinance the building. That's how it works.
In terms of the business, it's not so much different. Revenues have to exceed expenditures or else you're in a world of trouble.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Right.
What's in it for the early membership, when you're out selling memberships, and what would a membership go for?
Director, Government Relations, Co-operative Housing Federation of British Columbia
I can only speak for B.C. in terms of that.
Director, Government Relations, Co-operative Housing Federation of British Columbia
What's in it for the early members is security of tenure. It's one of the most important parts of co-op housing. If you're a tenant, your landlord can evict you. They need a reason of course, but the reason could, in B.C. at least, be something as simple as they want their kids to move into your unit. In a co-op, as long as you pay your housing charges and live by the rules of the co-op, you can live there.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Now, are the costs for living in co-op housing meant to cover the actual operational costs and to build a reserve and to allow for repairs over the long term?