May 16, 2022

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Federal budget throws the languishing co-op housing sector a lifeline

Finance Minister Chrystia Freeland tables the federal budget in the House of Commons in Ottawa, on April 7.Adrian Wyld/The Canadian Press

The long-neglected co-operative housing sector got a major boost in the federal government’s 2022 budget, but given the scale of Canada’s affordability challenge some hope it’s just the beginning of something bigger.

“It is tempting to say to the government, ‘Get serious: the homes that are promised in this budget don’t come anywhere close to meeting the demand for affordable homes,’ ” said Thom Armstrong, chief executive officer of the Co-operative Housing Federation of BC. “But on the other hand, we’re way better off today than we were yesterday … The last prime minister to approve a federal housing program was Brian Mulroney.”

Mr. Mulroney also completely cut the federal co-op housing program (which had built 60,000 units over its lifetime) in 1992, his last budget before he resigned in 1993.

At the time, the government said costs for social housing were growing at 6.5 per cent per year, rising to about $2-billion in 1991-92. In 1995, a new Ontario government under Progressive Conservative premier Mike Harris cancelled close to 17,000 planned units of provincially funded co-op and non-profit housing and downloaded responsibility for such programs to municipalities. In British Columbia and Quebec, governments have continued to create new co-ops, but at a much slower rate than previous decades.

The budget delivered by Finance Minister Chrystia Freeland (who grew up in Edmonton’s Hromada Housing Cooperative co-founded by her mother Halyna Chomiak Freeland) will direct $1.5-billion to co-op housing in the form of $500-million in grants that will serve as seed capital to get projects under way and another $1-billion in low-interest financing to pay for construction.

“This program is likely to be a game changer,” said Tim Ross, executive director of the Co-operative Housing Federation of Canada, whose organization has lobbied hard to get federal money to the provincial co-operatives. “We’re obviously looking forward to detailed program design, to make sure it works effectively and quickly. There are many projects stuck on desks because of a lack of funding or financing, and there are significant opportunities for infill, to look at redevelopment of underdeveloped public lands.”

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In all, the budget proposes about $10-billion for housing programs (including a housing innovation accelerator fund). If that was spread out over five years, it would amount to 0.44 per cent of federal spending per year; presuming government spending, pegged at $452-billion for 2022, follows its own projections.

“It’s not huge in the scheme of things, the order of magnitude is not like the magnitude of pandemic-relief spending,” said Greg Suttor, a housing policy and research consultant.

In the heyday of Canada’s spending on social housing between the seventies and the eighties, close to 20,000 public housing and co-op spaces were built every year – often with major funding participation from provincial and municipal levels of government. A CMHC study found that at its peak – between 1979 and 1985 – it cost $2.7-billion to build 38,715 co-op units in 1,089 projects, averaging 6,400 units a year.

Today, the math is a little tougher.

“It would be hard to build a new rental apartment unit for less than $400,000 [per unit]. And it could well be higher, because the average co-op unit is a two-bedroom,” Mr. Suttor said. If one assumes that co-ops can capitalize on using their own land banks (which some of the larger organizations have) or rely on donations of municipal land and relief from taxes of charges, Mr. Suttor could see equity contributions cut between $100,000 to $200,000 off that building price. “This is a program that ramps up to $76-million two years from now, so that’s roughly 380 units a year” that could be delivered, he estimates.

“The economics of building housing is very tough right now … we’ll only be able to go so far with this investment,” Mr. Ross said.

The other challenge for the new funding is how well it can provide for the rent-geared-to-income portion of residents. Historically, between 25 per cent to 30 per cent of co-op residents paid well below market rent, with market rates paid by middle-income residents. This design is intentional in that it keeps a building mixed income, in the hopes of avoiding concentrations of poverty once found in sixties-style public-housing projects.

“Most co-ops that have been operating for three decades or more are charging 65 to 75 per cent of market,” Mr. Armstrong said.

In January, the federal government announced a deal to spend $118.2-million over seven years for existing co-op housing providers to keep those rent-geared-to-income subsidies. However, the newly announced program has no explicit mechanism for providing subsidized rents.

“There has to be more money down the road, the new supply is great, but there’s a whole cohort coming to the end of their useful lives and need to be redeveloped,” Mr. Armstrong said. “No one’s going to want to see an entire generation of co-ops decay.

“I’ve had many a conversation with many a housing minister, and they say, ‘You guys are never satisfied.’ It’s my job not to be satisfied until every person who needs one has a safe and affordable place to call home.”

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