November 18, 1998.

To:Community and Neighbourhood Services Committee

From:Commissioner of Community and Neighbourhood Services

Subject:Reform of Social Housing Programs - Final Report of the Social Housing Committee

Purpose:

To provide members of Council with the final Report of the Social Housing Committee, which makes recommendations to the Minister of Municipal Affairs and Housing with respect to the reform of social housing programs in Ontario; and to recommend a Council communication to the Minister of Municipal Affairs and Housing with comments regarding the Social Housing Committee's report.

Financial Implications:

No financial implications identified.

In 1998, it is estimated that the City will pay approximately $255 million (in 1998 budget) for its share of social housing programs. Estimates for future years are not yet available.

Recommendations:

It is recommended that Council:

1.Write to the Minister of Municipal Affairs and Housing with respect to the following comments on the Report of the Social Housing Committee:

(a)endorse the Social Housing Committee's Final Report and encourage the provincial government to proceed quickly with implementing the reform proposals so that the devolution of administrative responsibility for social housing to municipalities can proceed;

(b)note that the costs of administering social housing have not been fully included in the download number, indicate that, given the size of the portfolio, these costs will be considerable in the City of Toronto, and seek a commitment for provincial funding for these administrative costs when the responsibility is transferred;

(c)re-emphasize Council's position that administration of unilateral federal housing programs not be transferred to municipalities;

(d)advise that, in the City's view, benchmarks for housing provider operating costs must be in place before operating loans are set and that the process for establishing these benchmarks should begin immediately and be done in partnership between the Provincial government, municipalities and housing providers ;

(e)specifically commend the Committee for its recommendations that technical audits be conducted to determine the adequacy of capital reserves, that these reserves be "topped-up" by the Province as required, and that the Province establish and fund new capital reserves for the Ontario Housing Corporation stock;

(f)caution that, while strategies for accelerated loan repayment to municipalities and capturing a portion of housing provider surpluses may be desirable, the City has some concern about the potential for significantly increased municipal administrative costs and creating disincentives for housing providers to operate efficiently; and

(g)emphasize that for social housing reform to succeed, the new program must be designed and implemented in partnership between housing providers, municipalities and the provincial government, and identify the City of Toronto's interest in being an active participant in the design and implementation process.

2.Authorize the appropriate City officials to take the necessary steps to give effect to Recommendation # 1.

Council Reference/Background:

Background:

The process for reforming social housing began in 1997 when the province announced it would download financial and administrative responsibility for social housing to the municipal level. Financial responsibility for social housing was transferred to municipalities effective January 1, 1998 and it is intended that program administration be transferred sometime in the next 2 years.

The Minister of Municipal Affairs and Housing (MMAH) launched the reform process by establishing an Advisory Council. This Advisory Council set out a direction for program reform rather than a detailed plan. Therefore, earlier this year, the Minister appointed the Social Housing Committee (SHC) to develop more detailed plans.

In late August 1998, the SHC released a Discussion Paper on Social Housing Reform and invited comments from interested stakeholders. Many housing providers, community agencies and municipalities, including the City of Toronto, provided feedback to the Committee. Council's approved position on the Discussion Paper is provided as Appendix A to this report.

On November 3, 1998 the Committee submitted its final Report of the Social Housing Committee to the Minister of Municipal Affairs and Housing. A copy of the full text of the Report of the Social Housing Committee is provided as Appendix B to this report.

The Minister of Municipal Affairs and Housing is now in the process of determining the government's response to the Social Housing Committee proposals.

Summary of Reform Recommendations:

The recommendations contained in the November 1998 Final Report have not changed significantly from those which were contained in the August 1998 Discussion Paper. They propose a social housing program that is intended to be simpler to administer, more cost-effective, more business-like and more accountable.

Under the current system, cost controls come more from provincial oversight which has permitted the province to exercise a substantial amount of control over provider operations. The new funding model proposes trade-offs for both the housing providers and municipalities who will administer the program. Providers would gain more autonomy, funding predictability, and streamlined accountability. In return, they would be required to repay to the municipality some of the debt which they did not have to repay under the old program, and to operate within established cost and revenue benchmarks. Municipal administration costs would be reduced through harmonized programs and more targeted and streamlined methods of administration and overview.

Funding levels for each provider would be initially established based on cost and revenue benchmarks, and the SHC now recommends that these benchmarks be reviewed after 10 years to determine whether or not adjustments are needed. Instead of a high degree of monitoring for all providers, emphasis is placed on developing systems and protocols to identify providers which may have difficulties, and to take action to help those providers resolve difficulties and stabilize.

SHC recommends consolidated management of mortgages (to attain below-market financing rates, and lock in rates over entire amortization period to achieve certainty) and energy audits of projects to determine if money can be saved through system conversions (with the province paying for the audits). By providing incentives for efficient operations, providers would be able to repay City subsidies sooner. Finally, the SHC recommends allowing cities to combine social housing intake functions with similar functions for other social programs it delivers if savings could be achieved in this way.

Details about the methodology and the process for implementing the benchmarks have not yet been established. Protocols around early detection of potential problems, municipal responses and default management also need to be developed. SHC recommends that municipalities be included in the design and implementation work, and work directly with housing providers to review data and calculations.

The relationship between the municipality and housing providers would be established by two agreements. One agreement would address the operating loan the provider must pay back to the municipality; the other would address funding for rent-geared-to-income units. Both agreements would have standard clauses about reporting requirements, breaches and remedies, and set out requirements established by the province (provincial standards). Details about how projects in difficulty will be managed need to be determined.

Details about how providers would report to municipalities have yet to be worked out. In particular, it is imperative that tools and information streams are developed which would permit the City to respond quickly if a provider has financial or other problems.

The model proposes that the province will continue to have an ongoing role in setting and monitoring standards in key areas, transferring the federal share of funding to the municipality, reporting to the federal government as required, and participating in centralized management of mortgage renewals and default management.

Provincial standards are recommended in nine key areas, generally related to access to rent-geared-to-income units. Standards include setting a minimum number of RGI units within each municipal jurisdiction (roughly equivalent to the current number of units) and having provincial consistency around issues such as eligibility, benefit level, RGI calculations and minimum rent. The mandatory provincial standards are a base. The municipality, generally in consultation with housing providers, can choose to have additional requirements for all housing providers in its area, and/or set requirements which are specific to one or more providers.

SHC recommends harmonization of public housing with other social housing programs, and that municipalities have the option of managing and owning public housing projects in their area.

Key Changes to the Recommendations in the Draft Discussion Paper:

A Summary of the SHC recommendations, identifying changes which have been made since the release of the discussion paper, is provided as Appendix C. A number of significant changes are worthy of special note:

Repayment of the Operating Loan:

SHC recommendation 19 recommends that housing providers must now use 50% of their annual surpluses to repay their operating loan, in addition to their regular loan repayment based on rent increases, as proposed initially. Once the operating loan is repaid, housing providers must keep giving municipalities 50% of surpluses, as long as there is still a Rent Subsidy Agreement in place. Providers are also restricted in the ways they can use the surpluses which they can keep - to further reduce subsidies, for capital work, or, with municipal approval, to increase RGI units or create new units.

While the prospect of accelerated loan repayment and additional potential revenue to municipalities is attractive, this new recommendation must be viewed with caution. Monitoring provider budgets to identify surpluses and ensure compliance with the recommendation would drive up municipal administration costs significantly. Some would also argue that clawing back surpluses discourages housing providers from accumulating them in the first instance, and that incentives for early loan repayment are a better solution.

Benchmarks:

SHC Recommendation 6 (new) recommends that the province set up a true benchmarking process to determine acceptable provider operating costs, for the purposes of setting the operating loan. ( The original recommendation proposed using a median of current operating costs and reducing it by 5%.) However, the report goes on to recommend that if true benchmarks cannot be set by the time operating loans are to be established, the median cost minus 5% should be used.

The notion of setting true benchmarks as the basis for the operating loan is a good one and, as recommended by the SHC, work in this regard should begin immediately. There should be no reason why these costs cannot be established in a timely manner and used as the basis for the operating loan calculations. Any "interim" solutions will only undermine the benchmarking work which must be done and may threaten the viability of some providers. In addition, as the benchmark is the basis for the calculation of the loan, revisions to that benchmark would create a significant amount of unnecessary additional administrative work.

The report does not recommend ongoing reviews of provider budgets, but rather a one-time review at the ten year point (rather than the three year point which had been originally contemplated) to determine whether there has been a material change to the cost or revenue components of the operating loan calculations. Although the City did not initially advocate for review once the benchmark was set, this approach is acceptable.

Adequacy of Capital Reserves:

The City of Toronto has expressed considerable concern about the state of repair of the social housing stock to be transferred, and the availability and adequacy of capital reserves. It is extremely encouraging to note that the final report of the Social Housing Committee recommends technical audits to determine the adequacy of capital reserves for all social housing projects, provincially-funded "top up" of reserves where audits demonstrate that this is required, and provincially-funded reserves for public housing.

Senior Government Involvement in Housing:

The SHC recommends all levels of government come together to discuss how Ontario's current social housing stock can be funded after the current operating agreements expire with the federal government. The Committee also recommends all levels of government work together to develop a comprehensive social housing policy for Ontario, and has suggested that the costs of social housing should not be funded through property taxes, but more rightly through income-based taxes. This advocacy by the Social Housing Committee for a renewed federal and provincial role in social housing is much welcomed.

Conclusions:

As the City is now paying the provincial share of the costs of social housing, it is crucial that the City be in a position to control decisions regarding how that social housing is administered. Transfer of administrative responsibility for social housing to municipalities is a prerequisite of true "say for pay". However, the costs of administration in the City will be high. While these costs have not been officially identified by the provincial government, unofficial estimates range between $5 million and $7 million per year. It is recommended that these costs be funded by the Province.

Discussions regarding program reform have been on-going since the provincial government first announced its downloading intentions. It is time for some decisions to be made and for the design and implementation of the reformed program to begin. The City's position on the final report of the SHC should be forwarded to the Minister so that he is aware of the City's position as he makes his decisions about the implementation of the recommendations in the report.

It is also important to point out the City's former position regarding unilateral federal social housing programs and note that the City has no interest in the administration of these programs.

Attachments:Appendix A:Council's Position on Draft Discussion Paper

Appendix B:Report of the Social Housing Committee, November 3, 1998.

Appendix C:Changes Included in Final Report

Contact Name:

Joanne Campbell

Phone: 392-7885

Fax: 392-0548

Joanne Campbell

General Manager, Shelter, Housing & Support

Shirley Hoy

Commissioner of Community & Neighbourhood Services