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December 11, 1998

CORPORATE SERVICES COMMITTEE:

City Council, at its meeting held on November 25, 26 and 27, 1998, had before it Clause No.8 of Report No. 24 of The Strategic Policies and Priorities Committee, headed "Disposition of 'Property Houses' Owned by the City of Toronto".

Council directed that the aforementioned Clause be struck out and referred back to the Corporate Services Committee for further consideration at its meeting to be held in January, 1999.

In addition, Council adopted the following recommendations:

"It is recommended that:

(1)the Chief Operating Officer of the Toronto Housing Company be requested to submit a report to the Corporate Services Committee, for consideration with this matter, on the number and type of houses that would have to be retained in the portfolio in order to allow the Company to rent as many units as possible to low income tenants; and

(2)none of the 'Property Houses' be sold until Council has considered the report of the Chief Operating Officer."

for City Clerk

J.A.Abrams/dcm

Encl.

Sent to:Commissioner of Corporate Services

Chief Operating Officer of the Toronto Housing Company

Corporate Services Committee

CITY CLERK

Clause embodied in Report No. 24 of the Strategic Policies and Priorities Committee, which was before the Council of the City of Toronto at its meeting held on November 25, 26 and 27, 1998.

Disposition of "Property Houses" Owned by the City of Toronto

(City Council on November 25, 26 and 27, 1998, struck out and referred this Clause back to the Corporate Services Committee for further consideration at its meeting to be held in January, 1999.

Council also adopted the following recommendations:

"It is recommended that:

(2)none of the 'Property Houses' be sold until Council has considered the report of the Chief Operating Officer.")

The Strategic Policies and Priorities Committee recommends the adoption of the report (November 12, 1998) from the Chief Administrative Officer, subject to the addition of the following recommendation:

"(5)that no tenant is unwillingly evicted as a result of the adoption of this report without a further report being submitted to the Corporate Services Committee and Council".

The Committee reports for the information of Council, having:

(1)requested the Chief Administrative Officer to report to the Corporate Services Committee on locking the surplus funds into an account to be used for the expansion of, or provision of, crisis housing;

(2)should the Commissioner of Community and Neighbourhood Services identify needs for social housing, that a report be forwarded to the appropriate Committee for consideration; and

(3)the Chief Administrative Officer provide an information session to members of Council on all of the housing stock that the City has in its direct or indirect control, such session to focus on the organizational structure, who controls it, strategies, budget size, and amount required to bring the housing stock up to standard.

The Strategic Policies and Priorities Committee submits the following report (November12,1998) from the Chief Administrative Officer:

Purpose:

The purpose of this report is to provide the Strategic Policies and Priorities Committee with a series of over-arching recommendations on the sale of the property houses and the use of property assets to achieve affordable housing objectives.

Funding Sources, Financial Implications and Impact Statement:

Depending on the Strategic Policies and Priorities Committee's direction, the City may forego up to $10,000,000.00 in "Property Houses" sales over time.

Recommendations:

It is recommended that:

(1)Council retain the property houses portfolio as a City asset;

(2)Council adopt the October 26 report of the Commissioner of Corporate Services that was before the Corporate Services Committee on November 9, 1998 subject to the following amendments:

(a)the City continue the management arrangement it has with the Housing Company and that the mortgages which expire on December 1, 1998 be renegotiated and renewed for a period of up to one year;

(b)the Commissioner of Corporate Services be directed to work with the Housing Company to determine which properties could be declared surplus without undermining the balance of market rent required to support subsidized houses in the portfolio and the staff report's recommended process option 2, the "5 Category Process" be used to guide staff in making such determination;

(c)the revenue raised through sales of such surplus properties be put into a new "social housing" reserve fund to be maintained until such time as Council considers a Housing First strategy for the City;

(3)as soon as possible after the release of the report of the Mayor's Action Task Force on Homelessness, the Chief Administrative Officer work with the involved Commissioners to develop a policy for Strategic Policies and Priorities Committee's consideration on the sale of City assets to resolve the conflicting objectives of maximizing revenue from sale versus social housing objectives, the resulting report to include a Housing First policy option; and

(4)the Commissioner of Community and Neighbourhood Services report to the Community and Neighbourhood Services Committee with an analysis of the various strategies to gain the maximum benefit from City assets that are available to address the housing crisis.

Council Reference/Background/History:

The "Property Houses" portfolio consists of 60 properties, comprising 105 units, which were acquired/expropriated between 1930 and 1974 for parks purposes. These properties have never been used for park purposes and, in 1975, an informal arrangement was entered into with Cityhome for the management of the portfolio. In 1992, City of Toronto Council adopted a business plan which leased these properties to Cityhome. Twenty-two of the properties were leased for a term of 49 years and 28 of the properties were leased for a term of 25 years. The business plan included a $2.5 million rehabilitation program which was funded by a mortgage secured by the properties leased for 49 years. This business plan also included a process to rationalize the rent structure for these properties and to bring most of the rents up to low end of market levels by the end of 1997 and then to use the proceeds from market rents to create an internal subsidy pool so that below market rents could be applied to a number of units in the portfolio.

Of the 105 units, there are a total of ten vacant units of which four are single family homes and one is a two unit home. The balance of the vacant units are located within multi-family dwellings. A total of ten of the units are "assisted" housing units. Five of the properties, which contain a total of eight units are currently leased to social housing providers and, in the report from the Commissioner of Corporate Services, are recommended for retention by the City. The balance of the properties are currently rented at market, or near market, levels.

The mortgage balance due on December 1, 1998 is approximately $2,316,000.00. An amount of $759,000.00 from the initial advance remains unspent and there is an accumulated surplus of funds from the operation of the Property Houses in the amount of $498,000.00. If the balance of the initial advance and the surplus of funds were made available to satisfy a portion of the mortgage at maturity, the net amount required to fully discharge the mortgage is approximately $1,059,000.00 on December 1, 1998.

Consideration of this Issue to Date:

At a Budget Committee meeting held on March 9, 1998, the Community and Neighbourhood Services 1998 Operating Budget was considered. The Commissioner of Corporate Services and the Interim Lead for Real Estate were requested to report to the Budget Committee for its meeting scheduled to be held on March 31, 1998, submitting recommendations respecting the disposition of the "Property Houses" after confirming with the Parks Department that these properties were not required for Parks purposes.

The Corporate Services Committee, on June 22, 1998, had before it a report (June 11, 1998) from the Commissioner of Corporate Services seeking City Council authority to declare 55 of the 60 "Property Houses" as surplus to the City's requirements and authorizing the sale of the properties. The Corporate Services Committee deferred consideration of the report and requested the Commissioner of Corporate Services to consult with the local City Councillors to explore a mutually beneficial arrangement for all of the subject properties and report to the Corporate Services Committee no later than October 9, 1998.

At its meeting of October 9, 1998, the Corporate Services Committee deferred consideration of this matter until its meeting to be held on November 9, 1998.

In the meantime, at its meeting of October 8, 1998, the Community and Neighbourhood Committee recommended to Council that, among other things, the 60 "Property Houses" in the former City of Toronto be retained by the amalgamated Toronto Housing Company. City Council at its meeting on October 28, 29 and 30, 1998 directed that vacancies be filled and that Clause No. 4 of Report No. 10 of the Community and Neighbourhood Services Committee, headed 'Disposition of "Property Houses" Owned by the City of Toronto' be referred to the Strategic Policies and Priorities Committee for its meeting of November17, 1998.

The Corporate Services Committee at its November 9, 1998 meeting, considered an additional report by the Commissioner of Corporate Services, along with reports from the Commissioner of Community and Neighbourhood Services and the Housing Company. Various individuals and community group representatives spoke on this item. The committee recommended transferring the asset to the Housing Company and reaffirmed Council's decision to fill the vacant houses with people in need of family housing. The Committee also asked that any proposed sales be reported to Corporate Services and the Chief Administrative Officer's report on the disposition of the monies raised from the sales.

There are, therefore, two concurrent processes within two separate committees dealing with the same issue. This report attempts to merge these processes into one to be dealt with through the Strategic Policies and Priorities Committee.

Policy Context:

Council is faced with two competing priorities in this situation. On the one hand, the City is facing enormous financial pressures and has directed staff to sell real estate assets. On the other hand, the City is faced with an unprecedented rise in homelessness and a shortage of affordable housing supply.

The Mayor's Action Task Force on Homelessness will be reporting to Council within the next two months or so. It will propose to the City strategies for dealing with the immediate shelter needs of the homeless as well as longer term proposals to generate more supply of affordable rental housing.

In the meantime, the issue of the future of the "Property Houses" has been raised at two different Standing Committees of Council reflecting the two competing objectives described above.

The "Property Houses" issue also raises a broader policy question, specifically, to what extent should the social policy objectives of Council be met through the re-allocation of property or the revenues from the sale of property? The Community and Neighbourhood Services Committee has recommended a moratorium on sales of property that is residential or appropriate for shelter, and consideration of a "Housing First" policy. Earlier this year, Corporate Services staff proposed a process for the disposition of real property owned by the City that would allow for resolution of this kind of consideration.

The former Metro process ranked social housing needs equally with those of internal operating departments in considering the allocation of property, and in addition, before offering property on the open market, gave consideration to requests from cultural, race relations or community service organizations that supported a municipal program. The new City Council has directed that the review of sites include consideration of social objectives, circulation of surplus sites to the Council Strategy Committee for People Without Homes, and the potential alternative use of surplus property by non-profit organizations that support a municipal purpose.

Discussion:

As the background to this report demonstrates Council has been working in a number of parallel streams to address various and often conflicting pressures through 1998. At the beginning of the term, the Mayor and Council identified the housing shortage and the homelessness crisis as primary concerns. Council established a task force to provide Council with advice based on a thorough understanding of the issue. Council is also attempting to balance unprecedented demand on the resources it has available to deliver services to the community.

Before Council makes a long term decision on the property houses, it is recommended that it await the results of the report from Anne Golden, but proceed to deal with the property houses deemed surplus using the process recommended in the October 26, 1998, report from the Commissioner of Corporate Services. It is also recommended that a "social housing reserve" be created to earmark revenues from the sale of such surplus properties. It is further recommended that the property houses remain City assets until such time as a policy is developed that weighs all of Council's pressures and options. These actions will ensure Council keeps all avenues open until it has the information it needs to a make its decision.

As Council and its committees have worked through this issue, one outstanding question that needs to be addressed is whether or not Council has all of the information it requires to make informed decisions about how best to allocate its resources to address the chronic housing shortage. What is the best mix of housing and what strategies should the City employ to ensure it is providing maximum benefit for the resources available? While these questions may have been addressed by former Metro and City of Toronto Councils, this new Council should have the benefit of current information on best practices for management of housing to address this City's needs.

Conclusion:

This report attempts to reflect on the reports and discussions held to date on this complex issue and provide Council with a balanced and stepped approach that protects the City's assets, allows time for careful thought in terms of housing policy and asset management and at the same time addresses the immediate need to address the disposition of the property houses.

The Strategic Policies and Priorities Committee also submits the following transmittal letter (November 12, 1998) from the City Clerk:

Recommendations:

The Corporate Services Committee on November 9, 1998, recommended to the Strategic Policies and Priorities Committee and Council:

(A)the adoption of Recommendations Nos. (1) and (3) of the Board of Directors of the City of Toronto Non-Profit Housing Corporation (Cityhome) and the Board of Directors of the Metropolitan Toronto Housing Company Limited (MTHCL) embodied in the communication (September 18, 1998) from the Corporate Secretary, Board of Directors of the City of Toronto Non-Profit Housing Corporation (Cityhome) and the Board of Directors of the Metropolitan Toronto Housing Company Limited (MTHCL), viz:

"That the Board of Directors:

(1)recommend to the City of Toronto that the ownership of all the "Property Houses" be transferred at no cost to the new amalgamated Municipal Housing Company so that this portfolio can be used to provide affordable housing for families directly or through any sale proceeds;

(3) recommend that City of Toronto Council authorize the appropriate officials to take the necessary action to give effect thereto.";

(B)that the appropriate staff be requested to further explore the options for such housing stock in order to maximize its potential for social housing purposes, given:

(a)the extent of the current waiting lists for affordable family housing; and

(b)that City Council has previously advised the Minister of Municipal Affairs and Housing and the Chairs of the Boards of the Ontario Housing Corporation (OHC) and the Metropolitan Toronto Housing Authority (MTHA) of its opposition to the sale of the scattered houses owned by OHC in the City of Toronto;

(C)that existing tenants receive the right to purchase his/her own specific unit within any of the subject properties that are of the following type: a duplex, triplex or fourplex;

(D)that Corporate Services Committee and Council approval be required for any proposed sales; and

(E)that the Chief Administrative Officer be requested to report to the Corporate Services Committee on the disposition of any monies forthcoming from such sales.

The Corporate Services Committee reports, for the information of the Strategic Policies and Priorities Committee and Council, having requested the Commissioner of Corporate Services to submit a report to the Strategic Policies and Priorities Committee, when this matter is being considered, providing an economic analysis to determine on a unit basis which units should be sold in order to provide the optimum amount of affordable housing if such revenues were used for housing subsidies.

Background:

The Corporate Services Committee on November 9, 1998, had before it a report (October26, 1998) from the Commissioner of Corporate Services, recommending that:

(1)Option No. 2 as set out in the body of this report be adopted;

(2)subject to the Board of Cityhome passing a resolution to do so, the existing leases between Cityhome and The Corporation of the City of Toronto be terminated in the manner described in this report;

(3)City Council declare that, upon the leases having been terminated, the 55 houses owned by the City of Toronto, as set out in Appendix I, are surplus;

(4)notice to the public of the proposed disposition of the lands declared surplus be given;

(5)the Commissioner of Community and Neighbourhood Services be directed to continue to work with co-operative housing providers respecting their possible acquisition of some of the properties and to report back in the spring of 1999;

(6)the Commissioner of Community and Neighbourhood Services consult with the non-profit housing providers and community agencies and report further if any of these groups are interested in acquiring available properties prior to their sale on the open market;

(7)the Commissioner of Corporate Services be authorized to market those properties which the previous owners and/or tenants, non-profit housing providers and community agencies and co-operative housing providers do not wish to purchase through a real estate broker for a listing price to be determined in consultation with the listing broker;

(8)funds in the amount of $1,059,000.00 be allocated to discharge the existing mortgage and that the City Treasurer report directly to City Council on the appropriate source of these funds;

(9)the City Surveyor, in consultation with the Director, Development and Support, Parks and Recreation, be directed to prepare a survey of the north portion of 144 Balsam Avenue and that this portion of the property be retained by the City in fee simple or, if retention in fee simple results in contravention of the zoning by-law for the remainder of that property, that the City's use of the portion be effected by way of an easement;

(10)the property interest recommended for retention pursuant to Recommendation No.(9), be placed under the jurisdiction of the Parks and Recreation Division for park purposes;

(11)the Commissioner of Community and Neighbourhood Services, in consultation with the Commissioner of Corporate Services report directly to Council on an interim management arrangement for the Property Houses, pending sale;

(12)the Commissioner of Community and Corporate Services and the Commissioner of Corporate Services submit a joint report recommending policies governing the use of property assets to meet social objectives; and,

(13)the appropriate officials be authorized and directed to take the necessary action to give effect to the foregoing.

The Corporate Services Committee also had before it the following reports and communications:

(a)(June 11, 1998) from the Commissioner of Corporate Services, seeking City Council authority to declare the "property houses" in the former City of Toronto on attached Appendix I (save and except for those five properties currently leased to community based housing providers and also identified on attached Appendix I) as surplus to the City's requirements and authorize the sale of these properties on the open market; advising that the issue of allocation of funds will be addressed in a separate joint report from the Commissioner of Corporate Services and the Commissioner of Community Services recommending policies on the use of property assets to meet social objectives; that the total of the current value assessment for the 55 property houses recommended to be declared surplus in this report is $10,955,845.00; that pending sale of the properties, a loss in rental revenue will be incurred in the amount of approximately $10,000.00 per month as at July 1, 1998; and recommending that:

(1)subject to the Board of Cityhome passing a resolution to do so, the existing leases between Cityhome and the Corporation of the City of Toronto, for the property houses be terminated in the manner described in this report;

(2)City Council, by By-Law, declare that, upon the leases having been terminated, the 55 houses owned by the City of Toronto, as set out on the attached Appendix I are surplus;

(3)notice to the public of the proposed disposition of the lands declared surplus be given;

(4)prior to offering the properties for sale on the open market, the first right to purchase be given to the previous owners and/or current tenants, on the terms set out in the body of this report;

(5)the Commissioner, Corporate Services, be authorized to market those properties which the previous owners and/or tenants do not wish to purchase through a real estate broker for a listing price to be determined in consultation with the listing broker;

(6)the funds from the sale of the houses subject to the 25 year lease be deposited into an account to be used to satisfy the mortgage at maturity;

(7)the City Surveyor, in consultation with the Director, Development and Support, Parks and Recreation, be directed to prepare a survey of the north portion of 144 Balsam Avenue and that this portion of the property be retained by the City, in fee simple or by way of an easement, and placed under the jurisdiction of the Parks and Recreation Division for parks purposes;

(8)City Council endorse the tenant relocation plan as outlined in the report (October26, 1998);

(9)the five properties currently being leased to community based housing providers, as identified within this report on Appendix I, be retained by the City to allow the current use of these properties to continue and the Commissioners of Corporate Services and Community and Neighbourhood Services determine the appropriate leasing arrangement for these five properties and report back thereon to the Corporate Services Committee;

(10)the Commissioner of Community and Neighbourhood Services advise social housing providers and the non-profit housing sector of the City's intention to dispose of the 55 properties set out in Appendix I and to report back if any of these groups are interested in acquiring any of these properties at market rates;

(11)the Commissioner of Community and Neighbourhood Services, review any particular needy or hardship situations and report, in consultation with the Commissioner of Corporate Services, on these situations;

(12)the Commissioner of Community and Neighbourhood Services and the Commissioner of Corporate Services submit a joint report recommending policies governing the use of property assets to meet social objectives; and

(13)the appropriate Civic officials be authorized to take the necessary action to give effect to the foregoing.

(b)(May 11, 1998) from the Commissioner of Corporate Services, seeking City Council authority to declare the "property houses" in the former City of Toronto on attached Appendix I (save and except for those four properties currently leased to community based housing providers and also identified on attached Appendix I) as surplus to the City's requirements, and authorize the sale of these properties on the open market; advising that the total of the current value assessment for the 56 property houses recommended to be declared surplus in this report is $11,134,845.00; and submitting recommendations in regard thereto.

(c)(May 25, 1998) from the Corporate Secretary, Board of Directors of the City of Toronto Non-Profit Housing Corporation (Cityhome) and the Board of Directors of the Metropolitan Toronto Housing Company Limited (MTHCL), advising that the Board of Directors of the City of Toronto Non-Profit Housing Corporation (Cityhome) and the Board of Directors of the Metropolitan Toronto Housing Company Limited (MTHCL) on May 25, 1998, during its consideration of a report (May 11, 1998) addressed to the Corporate Services Committee from the Commissioner of Corporate Services, headed "Sale of Property Houses", recommended to the Corporate Services Committee that it:

(1)defer consideration of the report (May 11, 1998) from the Commissioner of Corporate Services; and

(2)request the General Manager, Cityhome and the General Manager, MTHCL, to submit a joint report to the Corporate Services Committee, on alternative methods to retain these property houses for Social Housing purposes; and

that the Board of Directors also requested the General Managers to submit the aforementioned report to the Boards' Asset Management Committee for comment, prior to its submission to the Corporate Services Committee, if the Corporate Services Committee approves the foregoing Recommendations Nos. (1) and (2).

(d)(June 18, 1998) from Ms. Peggy Birnberg, Executive Director, Houselink Community Homes, advising that as a housing provider in the City of Toronto, they are greatly disappointed to learn that the Corporate Services Committee will be considering a proposal to sell selected City-owned residential properties; and stating that it is not in the interest of the citizens of Toronto to have a municipal government that treats a precious few units of housing as a revenue generating commodity and that it is in everyone interest that the municipal government demonstrates a willingness to fight against the trend of simple, short-term, money saving solutions, and to work with groups and organizations struggling to make this city more humane.

(e)(September 18, 1998) from the Corporate Secretary, Board of Directors of the City of Toronto Non-Profit Housing Corporation (Cityhome) and the Board of Directors of the Metropolitan Toronto Housing Company Limited (MTHCL), advising that The Boards of Directors on September 14, 1998, recommended that the Corporate Services Committee recommend to Council the adoption of Recommendations Nos. (1) and (3) contained in the report (September 9, 1998) from the Acting Chief Operating Officer; and that The Boards of Directors also decided to advise the Corporate Services Committee that the Boards would appreciate the City's support of the request to have the ownership of these property houses transferred to the amalgamated Toronto Housing Company, and to allow staff to further explore the options for such housing stock in order to maximize its potential for social housing purposes, given:

(a)the extent of the current waiting lists for affordable family housing; and

(f)(September 9, 1998) from Councillor Sandra Bussin, East Toronto - Ward 26, requesting that the Committee consider the following:

"that existing tenants receive the right to purchase his/her own specific unit within any of the subject properties that are of the following type: a duplex, triplex or fourplex"

So that a tenant who wishes to purchase will have the option to purchase a single unit only.

(g)(August 21, 1998) from Ms. Kimberly L. Beckman, Davies, Howe Partners, advising that she has been retained by Ms. Sharron Sayliss, a resident of 1 Hubbard Boulevard for a number of years; that her client and a number of her neighbours are interested in purchasing the building located at 1 Hubbard Boulevard; and forwarding a proposal respecting the use of the buildings located in the area.

(h)(September 25, 1998) from Commissioner of Community and Neighbourhood Services, recommending that the Corporate Services Committee give serious consideration to the proposal of the Housing Company Board that would transfer ownership of the Property Houses to the Company for affordable housing purposes, prior to considering other options that would result in their sale to the tenants or others at market value.

(i )(October 7, 1998) from Councillor Jack Layton, Don River, recommending that:

(1)all vacant units in the City's "Property Houses" portfolio be immediately rented to households in the emergency shelter system and/or families and individuals on the City's Housing Connections waiting list;

(2)the City retain the ownership of all houses in the portfolio and that the City Housing Company manage this stock in a manner that maximizes the number of affordable units available for low-income families;

Or alternatively

(3)the City delay any decisions to sell units in the Property Houses portfolio for 12 months to facilitate the review of recommendations of the Mayor's Homelessness Action Task Force with regard to the use of municipal assets for the reduction of homelessness.

(j)(Undated) from the Commissioner of Corporate Services, forwarding Appendix 1, entitled "Property House Portfolio", Appendix 2, entitled "Property Houses Survey" and Appendix 3 "Map Ref. No. GLSTR-B".

(k)(November 5, 1998) from Mr. Joe Hayes, registering concern respecting the process recommended for the sale of "Property Houses".

(l)(October 30, 1998) from the Corporate Secretary, Board of Directors of the City of Toronto Non-Profit Housing Corporation (Cityhome) and the Board of Directors of the Metropolitan Toronto Housing Company Limited (MTHCL), advising that The Board of Directors of The City of Toronto Non-Profit Housing Corporation (Cityhome) and theBoard of Directors of The Metropolitan Toronto Housing Company Limited (MTHCL) on October 26, 1998, during their consideration of a communication (October 9, 1998) from the City Clerk, advising of the action taken by the Corporate Services Committee on October 9, 1998, respecting City-owned property houses re-affirmed their decision made on September 14, 1998, with respect to the City-owned property houses, viz:

"The Boards of Directors recommended that the Corporate Services Committee recommend to Council the adoption of the following Recommendations Nos. (1) and(3) contained in the report (September 9, 1998) from the Acting Chief Operating Officer:

(3) authorize the appropriate officials to take the necessary action to give effect thereto; and

decided to advise the Corporate Services Committee that the Boards would appreciate the City's support of the request to have the ownership of these property houses transferred to the amalgamated Toronto Housing Company, and to allow staff to further explore the options for such housing stock in order to maximize its potential for social housing purposes, given:

(a)the extent of the current waiting lists for affordable family housing; and

(m)(September 28, 1998) from Mr. Chris Papadatos and Mr. Harry Weisbaum, forwarding comments respecting the sale of Property Houses in Ward 26.

Mr. Derek Ballantyne, Chief Operating Officer, Toronto Housing Company, gave a presentation to the Corporate Services Committee respecting the Sale of "Property Houses".

The following persons appeared before the Corporate Services Committee in connection with the foregoing matter:

-Mr. Tom Clement, Executive Director, Co-operative Housing Federation of Toronto;

-Ms. Colleen Wagner;

-Mr. Gilmore on behalf of his wife, Aline Gilmore;

-Ms. Sherron Sayliss;

-Mr. John Alexander;

-Mr. John Deacon, and Mr. Carmel Hili, Toronto Christian Resource Centre;

-Mr. Geoffrey Hill;

-Ms. Dornellas, appearing on behalf of her father;

-Mr. Kenneth Pantlin; and

-Ms. Evan Wilson.

The following Members of Council appeared before the Corporate Services Committee in connection with the foregoing matter:

-Councillor Sandra Bussin, East Toronto;

-Councillor Tom Jakobek, East Toronto;

-Councillor Jack Layton, Don River; and

-Councillor Joe Pantalone, Trinity - Niagara.

--------

(Report dated October 26, 1998, addressed to the

Corporate Services Committee, from the

Commissioner of Corporate Services headed,

"Sale of Property Houses (Wards 20, 21, 23, 25

and 26, Former City of Toronto)")

Purpose:

This report responds to a request from the Corporate Services Committee, in connection with a previous report which dealt with the subject matter, dated June 11, 1998 from the Commissioner of Corporate Services and which was deferred at the meeting of the Corporate Services Committee on June 22, 1998.

In addition, City Council authority is being sought to declare the properties, known as the Property Houses, in the former City of Toronto as set out in Appendix I to this report (save and except for those five properties currently leased to community based housing providers as identified on attached Appendix I) as surplus to the City's requirements and authorize the sale of these properties in the manner described in Option No. 2 in this report.

Financial Implications:

The total of the current value assessment of the 55 Property Houses recommended to be declared surplus in this report is $10,955,845.00.

Should City Council elect to adopt Option No. 2, the sum of $1,059,000.00 will be required to discharge the mortgage as set out in this report.

Recommendations:

It is recommended that:

(1)Option No. 2 as set out in the body of this report be adopted:

(3)City Council declare that, upon the leases having been terminated, the 55 houses owned by the City of Toronto, as set out in Appendix I, are surplus;

(4)notice to the public of the proposed disposition of the lands declared surplus be given;

(5)the Commissioner of Community and Neighbourhood Services be directed to continue to work with co-operative housing providers respecting their possible acquisition of the some of the properties and to report back in the spring of 1999;

(6)the Commissioner of Community and Neighbourhood Services consult with non-profit housing providers and community agencies and report further if any of these groups are interested in acquiring available properties prior to their sale on the open market;

(7)the Commissioner, Corporate Services, be authorized to market those properties which the previous owners and/or tenants, non-profit housing providers and community agencies and co-operative housing providers do not wish to purchase through a real estate broker for a listing price to be determined in consultation with the listing broker;

(8)funds in the amount of $1,059,000.00 be allocated to discharge the existing mortgage and that the City Treasurer report directly to City Council on the appropriate source of these funds;

(9)the City Surveyor, in consultation with the Director, Development and Support, Parks and Recreation, be directed to prepare a survey of the north portion of 144 Balsam Avenue and that this portion of the property be retained by the City in fee simple or, if retention in fee simple results in contravention of the zoning bylaw for the remainder of that property, that the City's use of this portion be effected by way of an easement;

(10)the property interest recommended for retention pursuant to Recommendation (9), be placed under the jurisdiction of the Parks and Recreation Division for park purposes;

(13)the appropriate officials be authorized and directed to take the necessary action to give effect to the foregoing.

Background:

At a Budget Committee meeting held on March 9, 1998, the Community and Neighbourhood Services 1998 Operating Budget was considered. One of the recommendations put forward at this meeting was that:

the Commissioner of Corporate Services and the Interim Lead for Real Estate report to the Budget Committee for its meeting scheduled to be held on March 31, 1998 submitting recommendations respecting the disposition of the "property houses" after confirming with the Parks Department that these properties are not required for Parks purposes.

The Property House portfolio consists of 60 properties, comprising 105 units, which were acquired/expropriated between 1930 and 1974 for parks purposes. These properties have never been used for park purposes and, in 1975, an informal arrangement was entered into with Cityhome for the management of the portfolio. In 1992, City Council adopted a business plan which leased these properties to Cityhome. Twenty-two of the properties were leased for a term of 49 years and 38 of the properties were leased for a term of 25 years. The business plan included a $2.5 million rehabilitation program which was funded by a mortgage on the properties leased for 49 years. This business plan also included a process to rationalize the rent structure for these properties and to bring the rents up to low end of market levels by the end of 1997. Provisions were also made to provide rent assistance to eligible households which would otherwise face economic eviction (total of 10 eligible households). The 60 properties, together with a summary of relevant information, are set out on Appendix I.

In response to the Budget Committee's request, the Commissioner, Community and Neighbourhood Services, in consultation with the Commissioner of Corporate Services, submitted a report dated March 27, 1998, to the Budget Committee. In this report, a number of issues were identified for further consideration. Also contained in that report was a recommendation that the approach taken to dispose of these properties be similar to the one taken by the former Metro with respect to the sale of the Spadina corridor properties. Due to the initial deferral of this report, and the intervening adoption by City Council, at its meeting held on July 8, 9 and 10, 1998, of a somewhat different procedure for the Spadina corridor properties, the procedure followed in this report is similar to that which precedes the current procedure for the disposal of the Spadina corridor properties. Of note is the fact that the Spadina corridor properties will now be sold subject to existing tenancies and it is the intention of this report that the Property Houses be sold once vacant.

The Corporate Services Committee, on June 22, 1998, had before it a report (June 11, 1998) from the Commissioner of Corporate Services seeking City Council authority to declare 55 of the 60

Property Houses in the former City of Toronto, on Appendix I to the report, as surplus to the City's requirements and authorize the sale of these properties. The remaining five Property Houses are currently leased to community housing providers and should be retained.

The Corporate Services Committee:

(1)deferred consideration of the foregoing report and requested the Commissioner of Corporate Services:

(1)to report further thereon to the Corporate Services Committee no later than October9, 1998;

(2)in consultation with the local City Councillors, to explore a mutually beneficial arrangement for all of the subject properties;

(3)to review the Current Value Assessments (CVAs) respecting these properties; and,

(4)to identify clear guidelines as to what the City's specific criteria are for subsidized housing; and,

(2)directed that a copy of the aforementioned report be forwarded to the Homelessness Action Task Force, Chaired by Anne Golden, for comment thereon to the October 9, 1998 meeting of the Corporate Services Committee.

This report addresses the request by the Corporate Services Committee that staff, in consultation with the local ward councillors, explore a mutually beneficial arrangement for all of the subject properties and review the current value assessment respecting these properties. The identification of clear guidelines as to what the City's specific criteria are for subsidized housing is dealt with in a separate report from the Shelter Housing Support Division also before the Committee.

Comments:

The Interim Lead for Real Estate previously sought input into the disposal of the property houses from Parks and Recreation, City Legal, Cityhome and Housing Division staff. Comments have been provided as follows:

Parks and Recreation:

The Director, Development and Support, Parks and Recreation has advised that these properties were acquired to expand City parks adjacent to or abutting the subject sites, however, it has not been the policy of Parks and Recreation to endorse conversion to parks from housing. With the exception of the request set out below, Parks and Recreation is not opposed to the disposition of these properties at this time on the understanding that the properties will continue to be used for the current purposes. Should they be retained and consideration of future uses be contemplated, parks purposes should be considered as the primary alternative land use for the sites.

The north edge of the property at 144 Balsam Avenue currently accommodates a public path to Glen Stewart Ravine, as set out on Appendix II. Parks and Recreation has constructed a set of stairs to enable the public to access the ravine via this path and stairs. In order to accommodate the continued existence of this path and provide continued access to the stairs, the City should sever and retain ownership of sufficient space along the north boundary of this property for this to occur.

Legal Implications:

City Legal staff have provided advice respecting the disposal of the property houses. They have indicated that the City of Toronto and Cityhome are free to negotiate a surrender of the 25 year lease.

Thirteen of the property houses were acquired by the City through expropriation. Consideration was paid prior to the enactment of the current Expropriations Act in 1968. Therefore, in terms of the requirements of the Expropriations Act, the City would be free to sell any of these properties that were expropriated.

The request from the Director, Development and Support, Parks and Recreation to sever and retain the north portion of 144 Balsam Avenue, may not be legally possible due to the impact that this could have on the remainder of the parcel of land. If this is the case, and the City cannot retain the fee, it is possible to achieve continued access to the ravine by means of an easement over the portion of land required.

Social Objectives:

In my June 11, 1998 report, I advised that, should City Council decide to sell the properties, the Commissioner of Community and Neighbourhood Services has proposed that five of the 60 properties be retained by the City and be made available to community-based housing providers. These five properties are currently leased to community housing providers at market, or slightly below market, rates.

It was further advised that, should City Council decide to proceed with the disposal of the remaining 55 Property Houses, Housing staff will determine the suitability of each property for use by community housing providers and, should any of the properties be deemed suitable, a report on the acquisition for this purpose will be submitted to the Corporate Services Committee. Housing staff wish to maintain this opportunity should City Council decide to proceed with Option 2 as set out in this report.

As noted in the Background section of this report, the Budget Committee requested staff to report on "whether monies generated from the potential sales of such properties should be reserved to realize important social objectives".

As requested by the Budget Committee, the Corporate Services Committee will, if Option 2 is approved, need to consider how the proceeds of sale will be allocated. There are a number of social objectives that could be met using the proceeds. The properties were originally purchased for parks purposes but have been used for many years to achieve housing objectives. A number of social priorities are also emerging in 1998, including the need to respond to homelessness and to children's issues. The issue of allocation of funds will be addressed in a separate joint report from the Commissioner of Corporate Services and the Commissioner of Community and Neighbourhood Services recommending policies on the use of property assets to meet social objectives. Should City Council adopt Option 2 in this report, the use of revenue from the sale of the Property Houses will be addressed in the policy report.

Resolution - Joint Board of Directors of Cityhome and the Metro Toronto Housing Company:

The joint Board of Directors of Cityhome and the Metro Toronto Housing Company also considered the matter of the Property Houses at their meeting of May 25^th, 1998 and asked Corporate Services Committee to defer consideration of the report dated June 22, 1998 in order that staff could report on alternative methods to retain all of the properties for social housing purposes.

Subsequently, at its meeting of September 14, 1998, the joint board passed a resolution that a recommendation be made to the City of Toronto that the ownership of all the Property Houses be transferred at no cost to the new amalgamated Municipal Housing Company so that this portfolio can be used to provide affordable housing for families directly or through any sale proceeds. The resolution is as follows:

"It is recommended that the Board of Directors:

(1)request the City that the ownership of all the "Property Houses" be transferred at no cost to the new amalgamated Municipal Housing Company so that this portfolio can be used to provide affordable housing for families directly or through any sale proceeds.

(2)forward a copy of this report, and together with any Board Resolutions related to it, to the Corporate Services Committee for their information at their meeting on October 9, 1998; and,

(3)authorize the appropriate Housing Company staff to take the necessary action to give effect thereto.

This report also directed that staff from Cityhome/MTHCL look at alternative methods to retain these houses for social housing purposes. Staff of the Shelter Housing Support Division are reporting separately on this matter".

Options:

Given the far reaching affects of any decision relative to the Property House portfolio, extensive consultation has taken place with City Departments, Ward Councillors and tenants. This consultation has resulted in the development of two options.

Option No. 1:

This first option is that City Council agree to the request of the Joint Board of Directors of Cityhome and the Metro Toronto Housing Company to convey the entire portfolio to the new amalgamated Municipal Housing Company at no cost.

Should City Council agree to this request and convey the portfolio, a number of issues must be addressed including; the City should be released from the mortgage as guarantor and further adjustments must be made to the mortgage which will reflect the Municipal Housing Company's status as owner and not lessee; costs in connection with the conveyance, including land transfer tax, if applicable should be borne by the Municipal Housing Company; the financial implications for the City is that the revenue from the sale of the 55 property houses will be foregone.

Option No. 2:

The second option addresses the Corporate Services Committee request to explore, in consultation with the local City Councillors, a mutually beneficial arrangement for all of the subject properties. This consultation process has revealed a general consensus that there are two objectives which must be met; to achieve revenues through the disposal of the Property Houses and to ensure that no tenants are de-housed. In some cases, these two objectives are opposing. A systematic approach has been developed that will serve to ameliorate this opposition.

This option identifies which properties may be sold in the near future, which should be retained for humanitarian reasons and sold in the future and those properties which should be retained and continued to be leased to community housing providers. This option also sets out the manner in which this should be carried out and, to the extent possible, takes into account the circumstances of the tenancies and the tenants' concerns. In addition, this Option sets out the manner in which the mortgage should be dealt with. Option 2 is as follows:

Analysis of Tenancies:

The Commissioner of Corporate Services was directed to, in consultation with the local City Councillors, explore a mutually beneficial arrangement for all of the subject properties. To this end, information was compiled relative to the current status of each property, specifically, the individual circumstances of each tenancy. A questionnaire (copy attached as Appendix III) was circulated to all tenants. A similar questionnaire was circulated by Councillor Pantalone's office to tenants in Ward 20. The data presented in this report represents a culmination of that collected by staff and of Councillor Pantalone's office. All of the affected Ward Councillors have been consulted. The information obtained through this process has resulted in the identification of five categories of properties. These categories take into consideration the requirements of the individual tenants in a specific manner.

A total of 88 questionnaires were distributed and 61 responses were received. Tenants were asked a number of questions including if they are interested in purchasing their home, if they are interested in purchasing but could not, whether they were interested in a co-operative arrangement, etc.

Five distinct categories of properties have been developed based on the tenant responses. A brief description of these categories, and the method of dealing with the properties in each category follows:

Category One:

Properties in Category One are those that were previously identified in the report of June11, 1998, as being appropriate for retention and subleasing to community housing providers. These properties are currently leased to community housing providers. The total number of properties in this Category is five. The Commissioners of Community and Neighbourhood Services and Corporate Services should determine the appropriate tenure arrangement for these five properties and report back to the Corporate Services Committee thereon.

Category Two :

These are properties which are occupied by tenants that have expressed interest in purchasing. Should the original owner of any of the properties within the portfolio presently be a tenant in one of the property houses and, if this original owner has expressed an interest in purchasing, then this original owner shall have the first right to purchase the property which they originally owned at the appraised market value. Subject to the above, the existing tenant in any of the property houses having the longest tenure who has indicated an interest in purchasing, shall have the first right to purchase the property which they occupy at the appraised market value.

In the event that the property in question is a multi-family dwelling and more than one tenant is interested in purchasing, the first right will be granted to the tenant with the longest tenure. If the right is not exercised, the right will then be granted to the tenant with the second longest tenure and so on. A tenant, if any, that desires to purchase and is unable as a result of length of tenure, will be offered another available unit from the portfolio.

When a property is to be sold to an existing tenant, it will be offered to the tenant at the appraised market value at the time that the tenant expresses in writing his or her interest in purchasing the property. Written notification of intention to exercise said right shall be given to the City within 30 days after City staff have sent the initial letter advising of the possibility of purchasing the property. Tenants will be provided with the option to purchase the property in a personally-delivered letter from the Commissioner of Corporate Services or her designate enclosing a notice of appraised value, and within thirty days of receipt of the notice of appraised value from the City, the Tenant may deliver an Offer to Purchase the property at the current market value acceptable in form to City staff, subject to Council approval.

A number of tenants have expressed interest in pursuing the option of co-operative housing, should the existing tenant(s) be unable to purchase. If this is the case, these properties could be considered for inclusion in Category 4. If neither of these disposal options are realized, the property should then be made available to the balance of the pool of tenants that have expressed interest in purchasing. Finally, if the property remains available, it should be offered for sale on the open market. The total number of properties in this Category is 22.

Category Three:

Properties in Category Three are those that are currently vacant. Although it was anticipated that these properties could be offered for sale in the immediate future, in order to achieve a mutually beneficial arrangement, it may be necessary to delay their disposal. This is due to the fact that tenants, who wish to purchase the property in which they reside but are unable to do so because they do not have the longest period of tenure, can, alternatively, be offered an available unit from the portfolio. There are a total of 3 Category Three properties.

Category Four:

A number of tenants have expressed interest in pursuing a co-operative housing approach. In some cases, tenants have stated that this would be a second choice to purchasing as set out in Category Two, above. The Co-operative Housing Federation of Toronto has been working with a group of property house tenants to develop a proposal that they plan to present to the Corporate Services Committee. Further details are set out in the report from the Shelter Housing Support Division.

In order to determine if this is a viable option, additional work is required. The co-operatives require an estimate of the market value of the properties that will be under consideration for this type of use and additional time is required to allow for decision making by co-operatives and to provide assistance/information to tenants. It is anticipated that approximately six months time is necessary for further investigation. Should Council adopt Option 2, staff should be directed to report back in the spring of 1999.

It is noted that this category includes properties which are occupied by tenants who have advised that they are not interested in purchasing and who also are not interested in the co-operative alternative. This category also includes properties which are occupied by tenants that did not respond to the survey. The basis for inclusion in this Category is to flag these properties as being occupied in order that provision may be made for these tenants.

The total number of properties in Category Four is 17:

In addition to the alternative of co-operative housing, the possibility of converting some of the multi-unit properties to condominium ownership has been raised. Undertaking the task of converting property to condominium status entails a substantial investment in time and money. It is not in the City's best interest to do so. As an alternative, interested tenants may consider organizing and purchasing the multi-unit properties in question as tenants-in-common and converting to condominium after the closing.

Along similar lines, the possibility of the City converting these same multi-residential units to equity co-operatives has also been raised. This would also entail an investment of time and money on the part of the City. Further, this form of co-operative housing has, historically, been difficult to finance. Once again, interested tenants may consider organizing and purchasing the multi-unit properties as tenants-in-common and converting to equity co-operative after the closing.

Category Five:

Category Five properties are those that should be retained for humanitarian reasons. In some cases, tenants have been occupying their homes for an extended period of time (up to 50 years), are senior citizens, have raised their families in the homes or are ill. Requesting these tenants to move at this point in time would present hardship.

In some cases, the tenants have expressed a desire to purchase their properties and this avenue should be explored, however, should they prove unable to purchase, inclusion in this Category will ensure continued security of tenure.

Properties in this Category are recommended for retention by the City until they are no longer occupied by the current tenants. After these properties become vacant, they will be sold. If any property becomes vacant before submission of my report respecting co-operative housing providers in the spring of 1999, the property should be included in the subject matter of that report. Properties becoming vacant after the submission of the said report should be offered for sale in the following order of priority: firstly, to tenants who expressed at the outset an interest in purchasing; secondly, to community groups; and thirdly, on the open market. After a review of the survey results and consultation with the local Ward Councillors, it has been determined that there are a total of 13 properties in this Category.

Tenant Relocation Program:

City staff will attempt to ensure that no tenants will be de-housed as a result of the program. Steps may include relocation of tenants into vacant units located in buildings which are to be retained or sold to co-ops, etc. In addition, the Chief Operating Officer of the Toronto Housing Company will be requested to assist those tenants in finding alternate housing, either market housing or assisted housing, depending on the specific requirements of the households and the eligibility criteria which applies to households seeking RGI assistance. In order to minimize the level of uncertainty which may be created for tenants living in these units a notice outlining the available options will be sent to all tenants, and in addition, a Tenant Relations Officer within Cityhome has been assigned to work closely with the tenants to answer their questions and to facilitate a smooth transition.

The tenant relocation program will be focussed, initially, on the sale of properties to the existing tenants who have expressed an interest in purchasing but who are unable to do so because of the priority system described in this report.

If a tenant will be de-housed as a result of the program, every effort will be made by staff to relocate the tenant elsewhere within the portfolio. For instance, the availability of vacant units within properties to be purchased by co-operatives will be explored. Further, vacancies within properties to be retained by the City will be investigated.

When, and if, it has been determined that there is no interest from tenants, co-operatives or non-profit and community agencies, properties will then be offered for sale on the open market through a real estate broker in accordance with the broker selection process.

Throughout this process, an outside appraisal firm will be retained to provide appraisals of the market value of properties as required for establishing market value and/or sale price with the original owners and/or tenants or co-operative housing providers who may elect to purchase, with the cost of the appraisals being charged against the proceeds of sale.

In order to initiate the foregoing disposition and tenant relocation strategy, the 25 year lease and the 49 year lease must be surrendered by Cityhome. Arrangements for the transitional ongoing, day-to-day management of the properties will be arranged by the Commissioner of Corporate Services and the Commissioner of Community and Neighbourhood Services.

The 49 year lease secures an existing mortgage which presents further issues.

Existing Mortgage Secured by 49 Year Lease:

As previously stated in the Background section of this report, 22 of the property houses are leased to Cityhome under a 49 year lease. This 49 year lease secures a mortgage which, as of the due date of December 1, 1998, will have a payout balance of approximately $2,316,000.00. An amount of $759,000.00 from the initial advance remains unspent and there is an accumulated surplus of funds from the operation of the property houses in the amount of $498,000.00.

One approach to facilitate the disposal of these properties is for Cityhome to renegotiate the mortgage for an appropriate term and in a manner which will permit the ongoing partial discharge of the principle sum and the ongoing partial surrender of the 49 year lease as it relates to individual properties as they are sold. This is problematic in that it may be difficult to arrange for financing that with permit partial discharges. Further, there is an actual out of pocket expense which the City will incur each time a partial discharge is registered. The requirement to partially discharge the mortgage will also translate into an administrative cost as well as a loss in flexibility in marketing the properties.

The other option available to the City is to discharge the mortgage on the maturity date. The total funding required is $2,316,000.00 less the balance of approximately $759,000.00 unspent amount from the initial advance less the figure of approximately $498,000.00 which is the accumulated surplus of funds from the operation of the property houses. The net amount is approximately $1,059,000.00. While this option requires a capital amount of $1,059,000.00, it will result in greater flexibility in terms of, not only the mortgaging, but also in the release of the 49 year lease (the first option which contemplates partial discharges as properties are sold, also contemplates partial releases from the lease agreement between the City and Cityhome). Pursuing this option would also relieve the City of the costs associated with partially discharging the mortgage on an ongoing basis and the administrative costs involved.

Cityhome is supportive of the second option which contemplates the City discharging the mortgage at maturity. This is the course of action which I recommend.

Summary of Option No. 2:

Option No. 2 is predicated on extensive consultation with the existing tenants, local Ward Councillors and other interested parties. This option attempts to address the two objectives which have been identified through this consultation process; to achieve revenues through the disposal of the Property Houses and to ensure that no tenants are de-housed.

Option No. 2 has resulted in the identification of five categories of properties; those which should be retained by the City for use by community housing providers (currently in place); those which are currently vacant; those which are occupied by tenants who have expressed an interest in purchasing; those that are occupied by tenants who are unable to purchase and are interested in a co-operative housing approach (this also includes those tenants who are not interested in purchasing and are also not interested in co-operative housing as well as those tenants who did not respond to the survey); and, those properties occupied by tenants which should not be required to be relocated at this time for humanitarian reasons and where it is recommended that the properties be retained until vacated, at which time they should be sold. A disposition and tenant relocation plan has been outlined based, in part, on these five categories of properties.

Option No. 2 also addresses the manner in which the issue of the existing mortgage and the leases between the City and Cityhome should be dealt with. The leases should be surrendered by Cityhome and the mortgage should be discharged by the City at maturity with these funds being recovered by means of revenue achieved through sale.

Review of Current Value Assessments:

Appendix I to this report indicates the amount of the current value assessment of each property. This figure has been included to provide an indication of scale. As each property is identified as being a candidate for sale (ie., to tenants, co-ops or on the open market) an appraisal will be commissioned to serve as a basis for potential purchasers to investigate the feasibility of acquisition.

Conclusions:

The Property Houses were purchased for the purpose of expanding existing parks. They have been in the City's ownership for a number of years and will not be used for their intended purpose.

The majority of these properties are tenanted and given the length of time that some of the tenants have occupied their homes, and special circumstances surrounding some of these tenancies, a case by case investigation was carried out. Option 2, as set out in this report, results in an arrangement which will be mutually beneficial to the majority of the tenants as it allows for the flexibility required while also furthering the City's interest of disposing of these properties. It is recommended that Option 2 be approved.

Contact Name:

Bonnie G. Duncan, Tel: 416-392-1861, Fax: 416-392-1880;

Email: bduncan.www.toronto.ca (cs98187).

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(Report dated June 11, 1998, addressed to the

Corporate Services Committee, from the

Commissioner of Corporate Services

headed, "Sale of Property Houses

(Multiple Wards - Former City of Toronto)")

Purpose:

To secure City Council authority to declare the "property houses" in the former City of Toronto on attached Appendix I (save and except for those five properties currently leased to community based housing providers and also identified on attached Appendix I) as surplus to the City's requirements and authorize the sale of these properties on the open market.

The issue of allocation of funds will be addressed in a separate joint report from the Commissioner of Corporate Services and the Commissioner of Community Services recommending policies on the use of property assets to meet social objectives.

Financial Implications:

The total of the current value assessment for the 55 property houses recommended to be declared surplus in this report is $10,955,845.00.

Pending sale of the properties, a loss in rental revenue will be incurred in the amount of approximately $10,000.00 per month as at July 1, 1998.

Recommendations:

It is recommended that:

(2)City Council, by By-Law, declare that, upon the leases having been terminated, the 55 houses owned by the City of Toronto, as set out on the attached Appendix I are surplus;

(3)notice to the public of the proposed disposition of the lands declared surplus be given;

(4)prior to offering the properties for sale on the open market, the first right to purchase be given to the previous owners and/or current tenants, on the terms set out in the body of this report;

(6)the funds from the sale of the houses subject to the 25 year lease be deposited into an account to be used to satisfy the mortgage at maturity;

(8)City Council endorse the tenant relocation plan as outlined in this report;

(13)the appropriate Civic Officials be authorized to take the necessary action to give effect to the foregoing.

Background:

At a Budget Committee meeting held on March 9, 1998, the Community and Neighbourhood Services 1998 Operating Budget was considered. One of the recommendations put forward at this meeting was that:

The "property house" portfolio consists of 60 properties, comprising 105 units, which were acquired/expropriated between 1930 and 1974 for parks purposes. These properties have never been used for park purposes and, in 1975, an informal arrangement was entered into with Cityhome for the management of the portfolio. In 1992, City Council adopted a business plan which leased these properties to Cityhome. Twenty-two of the properties were leased for a term of 49 years and 38 of the properties were leased for a term of 25 years. The business plan included a $2.5 million rehabilitation program which was funded by a mortgage on the properties leased for 49 years. This business plan also included a process to rationalize the rent structure for these properties and to bring the rents up to low end of market levels by the end of 1997. Provisions were also made to provide rent assistance to eligible households which would otherwise face economic eviction (total of 10 eligible households). The 60 properties, together with a summary of relevant information, are set out on Appendix I.

The Budget Committee, in considering a report dated March 27, 1998, from the Commissioner of Community and Neighbourhood Services, in consultation with the Commissioner of Corporate Services, requested the following:

(a)the Chief Administrative Officer submit a report to the Budget Committee and Corporate Services Committee in May, 1998 regarding:

(i)the disposition of property houses, determining which ones can be sold and how tenants who cannot afford to move can be accommodated; and

(ii)whether monies generated from the potential sales of such properties should be reserved to realize important social objectives; and,

(b)the Chief Administrative Officer and Commissioner of Community and Neighbourhood Services submit a confidential report to the Budget Committee on the following matters:

(i)a list of the City-owned properties that could be sold;

(ii)the names of the tenants;

(iii)the rent paid for such properties;

(iv)the 1996 assessed value of these properties;

(v)whether the properties are lakefront properties; and,

(vi)the disposition of funds from the sale of such properties.

This information is provided in Appendix I, with the exception of item (ii) the names of tenants which, under Freedom of Information legislation, cannot be released and item (vi) the disposition of funds from the sale of such properties, which will be the subject of a separate joint report from the Commissioner of Community and Neighbourhood Services and the Commissioner of Corporate Services recommending policies on the use of property assets to meet social objectives.

Comments:

The Interim Lead for Real Estate has sought input into the disposal of the property houses from Parks and Recreation, City Legal, Cityhome and Housing Division staff. Comments have been provided as follows:

Parks and Recreation:

The north edge of the property at 144 Balsam Avenue currently accommodates a public path to Glen Stewart Ravine, as set out on Appendix II. Parks and Recreation has constructed a set of stairs to enable the public to access the ravine via this path and stairs. In order to permit the continued existence of this path and provide continued access to the stairs, the City should sever and retain ownership of sufficient space along the north boundary of this property for this to occur.

Legal Implications:

City Legal staff have provided advice respecting the disposal of the property houses as set out on Appendix III. They have indicated that the City of Toronto and Cityhome are free to negotiate a surrender of the 25 year lease.

The City of Toronto and Cityhome could also negotiate a surrender of the 49 year lease, however, due to the mortgage, this surrender is significantly more complicated. The mortgage matures on December 1, 1998. It is a closed mortgaged for a principle sum of $2.5M at an interest rate of 8.5 percent. The mortgagor is Cityhome and the City of Toronto is the guarantor. If Cityhome surrenders the 49 year lease in order to allow the disposal of the 22 properties held as security, the mortgagee may demand repayment of the full principal balance outstanding and can look to Cityhome and the City for repayment. This is likely since the termination of the lease would destroy the security of the mortgage. As an alternative, approval of the sale of the properties by the mortgagee could be sought and the mortgage could be paid down as the properties were sold. It is, however, highly unlikely that the mortgagee would agree to this arrangement without levying a penalty for early payment. The City would be incurring this additional cost. Accordingly, it would be prudent to market these properties with closing dates after the December 1, 1998, maturity date.

Social Objectives:

As noted above, the Budget Committee requested staff to report on "whether monies generated from the potential sales of such properties should be reserved to realize important social objectives."

The joint Board of Directors of Cityhome and the Metro Toronto Housing Company also considered this matter at their meeting of May 25th and will be forwarding recommendations directly to the Corporate Services Committee. The Board will be asking the Committee to defer this report and to ask staff to report on alternative methods to retain all of the properties for social housing purposes

The Commissioner of Community and Neighbourhood Services has proposed that five of the 60 properties be retained by the City and be made available to community-based housing providers. Four of the properties are currently leased to community housing providers and one is in the process of being leased. The leases are at market, or slightly below market rates.

Should the Committee decide to proceed with the disposal of the remaining 55 property houses, Housing staff will determine the suitability of each property for use by community housing providers and, should any of the properties be deemed suitable, a report on the acquisition for this purpose will be submitted to the Corporate Services Committee.

As requested by the Budget Committee, The Corporate Services Committee will need to consider how the proceeds of sale will be allocated. There are a number of social objectives that could be met using the proceeds. The properties were originally purchased for parks purposes but have been used for many years to achieve housing objectives. A number of social priorities are also emerging in 1998, including the need to respond to homelessness and to children's issues. The issue of allocation of funds will be addressed in a separate joint report from the Commissioner of Corporate Services and the Commissioner of Community Services recommending policies on the use of property assets, including revenues from the sale of the property houses, to meet social objectives.

Proposed Tenant Relocation Program:

The process which will be followed in the disposition of the properties will be similar to the process which was approved by the Council of the former Municipality of Metropolitan Toronto relative to the disposition of the Spadina Corridor properties and also includes the steps requested by the Commissioner of Community and Neighbourhood Services.

(1)should the original owner of any of the properties within the portfolio presently be a tenant in one of the property house, then this original owner shall have the first right to purchase the property, at the appraised market value, which they originally owned, notification of intention to exercise said right to be given to the City within 30 days, purchase to be concluded 60 days after notification by the original owner;

(2)subject to (1), above, the existing tenant in any of the property houses, shall have the first right to purchase their property which they occupy at the appraised market value, notification of intention to exercise the said right to be given to the City within 30 days, purchase to be concluded 60 days after notification by the tenant of intention to purchase;

(3)in the event that the property in question is a multi-family dwelling (i.e., the duplexes on Hubbard Blvd.) and both tenants are interested in purchasing, the first right will be granted to the tenant with the longest tenure. If the right is not exercised the right will be then be granted to the tenant with the second longest tenure and so on. A tenant, if any, that desires to purchase and is unable as a result of length of tenure, will be offered another vacant unit from the portfolio;

(4)in the event that the tenants elect not to acquire the property, then the property would be offered for sale through a real estate broker in accordance with the broker selection process also before your Committee today;

(5)in cases where existing tenants would not have the economic means to purchase the property, the General Manager of the Toronto Housing Company will be requested to assist those tenants in finding alternate housing, either market housing or assisted housing, depending on the specific requirements of the households and the eligibility criteria which applies to households seeking RGI assistance;

(6)those tenants which moved into the houses after 1992 are already paying a "low end of market rent" but they would not be eligible for RGI assistance. The General Manager of the Toronto Housing Company will, however, provide information to these tenants on available market units in developments managed by the Housing Company and assist these tenants in finding suitable accommodation;

(7)in order to minimize the level of uncertainty which may be created for tenants living in these units a notice outlining the available options will be sent to all tenants, and in addition, a Tenant Relations Officer within Cityhome has been assigned to work closely with the tenants to answer their questions and to facilitate a smooth transition; and,

(8)once the surplus properties and the time line for the disposition of the properties has been established, the General Manager of Cityhome and the Real Estate staff will work closely to co-ordinate the relocation plan for the specific units which will be affected.

Marketing Strategy:

The property houses should be marketed as they become vacant and the marketing program will be carried out in close association with the tenant relocation program. It is clearly to the City's benefit to market the properties as they become vacant and, in order to do so, it will be necessary to incur a degree of short term rental revenue loss. These losses will be incurred during the period of time that property is vacant, pending sale and conveyance. As of July 1, 1998, this loss will be approximately $10,000.00 per month. If it becomes apparent that any given property will not become vacant within a reasonable time, then marketing will commence on the basis that sale will be subject to existing tenancies.

With respect to the issue of the mortgage, in order to avoid any penalty associated with prepaying the mortgage (assuming that approval could be obtained from the mortgagee) it is recommended that the properties under the 25 year lease be marketed immediately with the proceeds deposited into an account to be used to satisfy the mortgage at maturity. Those properties which are subject to a mortgage should be marketed later in the year with closing dates to occur after the mortgage matures. The timing of the marketing of both groups of properties will be determined by occupancy status, as set out above.

In addition, consideration should be given to the possibility that the City may flood the market on any particular street. For instance, 16 of the properties are located on Crawford Street. Placing all of these properties on the market at the same time will result in lowering the selling price that may be achieved. It would not serve the City's interest to offer all of these properties at one time.

Bearing these factors in mind, it is recommended that the following steps be taken relative to the disposal of the property houses:

(1)surrender of the 25 year lease by Cityhome to the City, together with a commitment from Cityhome that it will also surrender the 49 year lease upon discharge of the mortgage and, that Cityhome will continue to assume day to day management of the property house portfolio until such time as each property is sold;

(2)retention of an outside appraisal firm to provide appraisals of the market value of properties as required as a component of the disposal process, as well as for establishing listing price and/or sale price with the original owners and/or tenants who may elect to purchase, with the cost of the appraisals being charged against the proceeds of sale;

(3)implementation of the Tenant Relocation Program as outlined in this report;

(4)retention of real estate brokers to market the properties and assist in the development of a marketing plan which takes into consideration the timing requirements vis a vis the properties which secure the mortgage, as well as ways that will ensure that the City does not flood the market on any particular street;

(5)an appropriate portion of the proceeds from sale be placed in an account designated to satisfy the mortgage financing;

(6)discharge mortgage on maturity; and,

(7)surrender of the 49 year lease.

Conclusions:

The property houses were purchased for the purpose of expanding existing parks. They have been in the City's ownership for a number of years and will not be used for their intended purpose. As such, with the exception of five of the properties which are currently leased to community housing providers at market rates, these properties should be declared surplus and sold on the open market.

The marketing strategy should take into account the occupancy status of each property and will be carried out in close association with the tenant relocation program as set out in this report.

Contact Name:

Bonnie G. Duncan, Tel: 416-392-1861, Fax: 416-392-1880

Email: bduncan.www.toronto.ca (cs98094.wpd)

Appendix III

The following comments have been received from City Legal staff.

"I am replying to your memo of April 23, 1998 in which you requested my reply to the questions therein by April 29.

The legal implications associated with the sale of the property houses have been addressed as they apply to the mortgaged and the unmortgaged properties, respectively. The following comments/opinions are rendered based on the assumption that the properties would be sold by the City unencumbered by the Cityhome leases since the properties are presumably unmarketable when encumbered by these non-revenue producing leases.

The property houses may be divided into two groups; those held by Cityhome under 25 year leases from the City and unencumbered by mortgaging and those held under 49 year leases from the City and subject to a mortgage with a maturity date of December, 1998.

(1)(a)Unmortgaged properties - The City and Cityhome are free to reach an understanding for the surrender by Cityhome of its 25 year lease to the City. The City would then be free to sell the unmortgaged portfolio. However, the purchasers of this portfolio would be acquiring the properties subject to existing residential leases and the terms therein. Residential tenants are legally entitled to security of tenure.

Furthermore, such purchasers may be subject to greater restrictions in dealing with residential tenants (eg. rent increases) than Cityhome or the City. The program which has been implemented to raise the rents to market levels is something that non-governmental landlords may be prohibited from continuing, if rent increases exceed those permitted to private sector landlords.

(b)Mortgaged Properties - The above comments relating to the surrender of the 25 year unmortgaged leases apply as well to the surrender of the 49 year mortgaged leases. However, there are additional, more serious, legal and financial factors restricting the ability of Cityhome to surrender the mortgaged lease and for the City to accept such a surrender. This is set out in point No. 2 below.

(2)The leasehold mortgage provides that the mortgagee may, at its option, demand repayment of the full principal balance outstanding if Cityhome surrenders the lease without the prior written consent of the mortgagee. Furthermore, the City is a guarantor of the mortgage loan. If the mortgage becomes due and payable, the mortgagee will likely look to the City as well as to Cityhome for payment. Even if the mortgagee permitted the sale of the property, the City's guarantee would remain in effect, a situation which would be unfeasible from both a financial and legal point of view. The legal difficulty arises out of the fact that the City may not guarantee the financial obligation of a commercial enterprise.

(3)Thirteen of the property houses were acquired by the City through expropriation. Consideration was paid prior to the enactment of the current Expropriations Act in 1968. Therefore, in terms of the requirements of the Expropriations Act, the City would be free to sell any of these properties that were expropriated."

--------

(Report dated May 1l, 1998, addressed to the

Corporate Services Committee from the

Commissioner of Corporate Services)

Purpose:

To secure City Council authority to declare the "property houses" in the former City of Toronto on attached Appendix I (save and except for those four properties currently leased to community based housing providers and also identified on attached Appendix I) as surplus to the City's requirements and authorize the sale of these properties on the open market.

Financial Implications:

The total of the current value assessment for the 56 property houses recommended to be declared surplus in this report is $11,134,845.00.

Recommendations:

It is recommended that:

(2)City Council, by By-Law, declare that, upon the leases having been terminated, the 56 houses owned by the City of Toronto, as set out on the attached Appendix I are surplus;

(3)notice to the public of the proposed disposition of the lands declared surplus be given in accordance with S.95-5 of the Municipal Code;

(4)prior to offering the properties for sale on the open market, the first right to purchase be given to the previous owners and/or current tenants, on the terms set out in the body of this report;

(6)the funds from the sale of the houses subject to the 25 year lease be deposited into an account to be used to satisfy the mortgage at maturity;

(8)City Council endorse the tenant relocation plan as outlined in this report;

(9)the four properties currently being leased to community based housing providers, as identified within this report on Appendix I, be retained by the City to allow the current use of these properties to continue and the Commissioners of Corporate Services and Community and Neighbourhood Services determine the appropriate leasing arrangement for these four properties and report back thereon to the Corporate Services Committee; and,

(10)the appropriate Civic Officials be authorized to take the necessary action to give effect to the foregoing.

Background:

At a Budget Committee meeting held on March 9, 1998, the Community and Neighbourhood Services 1998 Operating Budget was considered. One of the recommendations put forward at this meeting was that:

Comments:

Parks and Recreation:

The Director, Development and Support, Parks and Recreation has advised of the following:

"In response to your memorandum dated April 23, 1998, regarding the proposed disposal of the sites previously acquired for parks purposes, I have reviewed the subject properties and provide the following comments for your consideration. The 60 locations listed on the summary are related to ten different parks or ravines. A summary identifying the respective properties and the related park or ravine is attached for your information.

The March 27, 1998 report from the Commissioner, Community and Neighbourhood Services notes that these properties were acquired to expand City parks adjacent to or abutting the subject sites. The conversion of a number of these sites to parks use would be beneficial to the respective parks, unfortunately, this conversion would be at the expense of the available housing stock. It has not been the position of Parks and Recreation to endorse this type of conversion in previous discussions regarding these properties. This approach remains consistent at this time.

In this regard, with the exception of the request set out below, I advise that I am not opposed to the disposition of these properties at this time on the understanding that the properties will continue to be used for the current purposes. Should they be retained and consideration of future uses be contemplated, I would request that parks purposes be considered as the primary alternative land use for the sites.

The north edge of the property at 144 Balsam Avenue currently accommodates a public path to Glen Stewart Ravine. Parks and Recreation has constructed a set of stairs to enable the public to access the ravine via this path and stairs. In order to permit the continued existence of this path and provide continued access to the stairs, I request that the City sever and retain ownership of sufficient space along the north boundary of this property for this to occur."

Legal Implications:

Social Objectives:

The Commissioner of Community and Neighbourhood Services has identified four of the 60 properties which should be retained by the City. These four properties are currently being leased to community based housing providers. These leases are at market, or slightly below market rates.

As the balance of the property houses are offered for sale, Housing Division staff will determine the suitability of each property for use by identified community groups and, should any of the properties be deemed suitable, a report on the acquisition for this purpose will be submitted to Corporate Services Committee.

Proposed Tenant Relocation Program:

(7)in order to minimize the level of uncertainty which may be created for tenants living in these units a notice such as the one in Appendix VI to this report, outlining the available options will be sent to all tenants and, in addition, a Tenant Relations Officer within Cityhome has been assigned to work closely with the tenants to answer their questions and to facilitate a smooth transition; and,

Marketing Strategy:

The property houses should be marketed as they become vacant and the marketing program will be carried out in close association with the tenant relocation program. If it becomes apparent that any given property will not become vacant within a reasonable time, then marketing will commence on the basis that sale will be subject to existing tenancies.

Bearing these factors in mind, it is recommended that the following steps be taken relative to the disposal of the property houses:

(3)implementation of the Tenant Relocation Program as outlined in this report;

(5)an appropriate portion of the proceeds from sale be placed in an account designated to satisfy the mortgage financing;

(6)discharge mortgage on maturity; and,

(7)surrender of the 49 year lease.

Conclusions:

The property houses were purchased for the purpose of expanding existing parks. They have been in the City's ownership for a number of years and will not be used for their intended purpose. As such, with the exception of four of the properties which are currently leased to community housing providers at market rates, these properties should be declared surplus and sold on the open market.

The marketing strategy should take into account the occupancy status of each property and will be carried out in close association with the tenant relocation program as set out in this report.

Contact Name:

Bonnie G. Duncan, Tel: 416-392-1861, Fax: 416-392-1880

Emailbduncan.www.toronto.ca (cs98072)

Appendix III

The following comments have been received from City Legal staff.

"I am replying to your memo of April 23, 1998 in which you requested my reply to the questions therein by April 29.

--------

(Report dated September 9, 1998, addressed to

the Board of Directors, The Metropolitan Toronto

Housing Company Limited, from the Acting Chief

Operating Officer, Metropolitan Toronto Housing

Company Limited headed, "Disposition

of City-owned "Property Houses")

Recommendations:

It is recommended that the Board of Directors:

(1)request to the City that the ownership of all the "Property Houses" be transferred at no cost to the new amalgamated Municipal Housing Company so that this portfolio can be used to provide affordable housing for families directly or through any sale proceeds;

(2)forward a copy of this report, and together with any Board Resolutions related to it, to the Corporate Services Committee for their information at their meeting on October 9, 1998; and,

(3)authorize the appropriate Housing Company staff to take the necessary action to give effect thereto.

Background:

The "Property House" portfolio consists of 60 properties, comprising 105 units acquired/expropriated between 1930 and 1974 for parks purposes. The properties were never used for park purposes and in 1975, Cityhome took over the management of the portfolio. In 1992, City Council adopted a business plan which leased these properties to Cityhome. The lease terms are 49 and 25 years for 22 and 38 of the properties respectively. The business plan included a process to bring the rents up to low end of market levels by the end of 1997 and a provision to provide rent assistance to a number of low income households using the surplus from the portfolio. The Property Houses were managed conservatively by Cityhome, given that there was no City subsidy or reserve available. A $2.5 million mortgage on the 22 properties leased for 49 years was taken out to fund a rehabilitation program. Although major capital work was done on many of the buildings, the capital budget for repairs to the Property Houses is not substantial. The main purpose of the capital program was to provide short term capital funding to address immediate capital repair needs and minor improvements related to increasing rentability of the units at market rent levels.

At a City of Toronto Budget Committee meeting held on March 9, 1998, the Committee asked the Commissioner of Corporate Services to submit recommendations to dispose of the Property Houses. On May 11, the Commissioner of Corporate Services submitted to the Corporate Services Committee a plan detailing the process to sell the Property Houses.

At the Board of Directors meeting held on May 25,1998, the Board passed a resolution requesting that the Corporate Services Committee defer dealing with the City's Property Houses, and directing staff from Cityhome/MTHCL to look at alternatives methods to retain these houses for social housing purpose. At its meeting on May 11, 1998, the Corporate Services deferred its consideration of the issue until October 9, 1998. City staff have been asked to report on a "win-win approach", ie options that will serve the interests of the City and the existing tenants. City staff has been surveying tenants to determine their interest in purchasing the houses and seeking ideas on alternative community uses of the houses.

The current report presents the position of the municipal housing company; a separate report to the Corporate Services Committee outlining the issues described above is being prepared by city staff from the Property and Shelter Housing Support Divisions. A copy of the report prepared earlier this year by the Commissioner of Corporate Services outlining the City's reasons for wanting to sell the Property Houses, as well as providing a background on the Property Houses portfolio has been included in Appendix I for background information.

Discussion:

The proposal to sell the Property Houses and to take the proceeds into general revenue would result in a loss of affordable rental housing stock in the City. Based on information from Housing Connection's waiting list, the largest group (53.8 percent) in need of housing in the City is families. Of the 42,624 households registered in March 1998, 22,955 were families. Of these families, 39 percent required 3 bedroom units and 10 percent 4 bedroom units. The combined Toronto Housing Company (THC) portfolio contains only 5,086 family units (17.8 percent), predominantly 2 bedrooms. The number of 3+ bedrooms in the portfolio is only 1,784 units.

Although the existing family stock in the social housing portfolio is quite small, the more relevant information to consider is housing availability. The THC net turnover for families requiring RGI units is almost insignificant in relation to the size of the waiting list. In 1997, only 154 units (8 percent of THC net turnover) were available to house families. Only 55 of the 1997 units were 3+ bedroom. The gap between the growing trend of housing needs in the family group and the annual availability of RGI units for families is extremely large.

The Interim Report of the Mayor's Homelessness Action Task Force (July 1998) identified families as being one of the "at-risk of becoming homeless" population groups. In 1996, families represented 46 percent of the people using hostels with more than 5,000 of these users being children. The Property Houses are ideally suited to serve families since over 70 percent of the units are two bedroom or larger. The chart below summarizes the number of properties and units by unit type, including the current number and type of subsidized rental units.

Type	Housing suitable for:	Properties	Percent	Units	Percent	Assisted Units
Bach	Singles, Couples	1	7%	17	23%	3
1-B		3		6		1
2-B	Small Families	14	34%	28	41%	1
1-B+2-B		5		13		1
3-B		16		16		2
4-B	Average & Large Families	8	57%	8	35%
5-B		5		5		1
1-B+3-B		3		6
N/A		1		1		1
Total		56		100		10

Options:

There are several alternatives to the simple disposal of the Property Houses. The underlying assumption of this report is that the very few larger units in the City's affordable social housing stock should be maintained. The current status of these 56 properties that 10 units are rented at RGI levels and 90 units at below market rent levels. In light of the current lack of affordable rental housing for families in the City, we propose that the City's objective in disposing its real estate assets should be, at a minimum, to maintain the level of the existing affordable rental housing.

It should be noted that selling the properties and re-investing the proceeds in social housing is an acceptable plan of action under this assumption. Perhaps one of the most compelling economic reason to consider selling the portfolio as part of a re-investment strategy is related to the concept of highest and best use in the valuation of real estate properties. From an appraisal point of view, the highest and best use of single family detached houses in the city core is owner occupied residential and not rental. Valuation of rental property is a function of the property's net operating income stream. Under current market conditions, this rental property value is much lower than the property as an owner occupied home. By selling these houses, the net proceeds would realize a higher gain than if the same number of units were sold as rental properties.

This report proposes that the ownership of houses be transferred at no cost to the new Toronto Housing Company to maximize the number of RGI units that can be rented to families directly or through any full or partial sale proceeds. The management of the portfolio or any new units built from its sale proceeds by THC will insure operating costs are maintained at cost effective levels and that all current or future RGI units would operate without municipal subsidies.

It is clear that the use of houses for rental is not the highest and best use of the asset from a financial perspective and that from a social perspective the dollars can be used to create new multi-residential family units. The alternatives that the housing company could consider are as follows:

(1)Keep the portfolio and increase the number of units receiving rental assistance generated from the portfolio's surplus funds;

(2)Sell the portfolio and use the funds to build new affordable and below market family housing units (2, 3 and 4 bedrooms); and

(3)Sell the portfolio and use the funds to redevelop affordable and below market family housing units (2, 3 and 4 bedrooms) on Housing Company existing properties.

Option 1:Keep the portfolio and increase the number of rental assistance using surplus funds from the portfolio.

The portfolio generated a surplus of about $240,000.00 in 1997 at current rent levels. The average rent for the portfolio is $ 747/mo, about $200 per month on the average below the low end market rents. In addition, there are still unused funds from the original $2.5 million mortgage for the rehabilitation program. The current finances of the portfolio is therefore sufficient to increase the number of rental assistance using surplus fund from the portfolio and continue with the rehabilitation program. The attached Appendix II shows the proforma and the maximum number of rental assistance under current rent levels and low end of market levels. Based on historical expenditure profile and allowing for an average reserve contribution of $2,500.00 per house, the following are the maximum number of rental assistance under current rent levels and low end of market levels:

Monthly Monthly Maximum

Rent AssistanceAssisted Units

Current Rent$800$47033

Low End of Market$1,020$62062

A review of the turnover statistics with the property manager indicates an average annual turnover rate of about 14 percent. Currently there are 9 vacant units of which one unit may required substantial capital repairs. It is therefore possible to increase the number of units receiving rental assistance from 10 to 33 within the next 12 months. At the current rate of increase, market levels can be achieved within the next 18 to 24 months. Given the current turnover rate, it should be possible to provide another 29 units with rental assistance within the same time frame.

Option 2:Sell the portfolio and use the funds to build new affordable and below market family housing units (2, 3 and 4 bedrooms).

While there are no recent appraisals done for each property, the attached Appendix I shows Current Value Assessment (CVA) for each property. Using assessment values as a proxy for market value is a very conservative approach. Nevertheless, the CVA for the portfolio is approximately $10.955 million. We will assume net proceeds from sales of $11.0 million. New housing can be developed using the proceed from sales and a mortgage on the development. The amount of mortgage is such that the rent can be kept at an affordable level. Therefore, the various possibilities will range from the building of 100 percent low end market units to 100 percent RGI units with the former yielding the highest number of units and the latter the least. At the other extreme of 100 percent RGI units, the development will not able to support a mortgage, and part of the proceeds from the sale would have to be set aside in order to provide ongoing rent-geared to income subsidies to some units in the development.

To support the work around the City's Affordable Housing Strategy, staff have developed estimates for construction and operating costs data for the various housing forms (walk up, townhouse, high-rise, shared single, rental hotel, etc). The following analysis uses these data to estimate the number of units that can be developed under the following two scenarios:

(a)A typical two, three and four bedrooms walk up development for family housing under various market and RGI rents combination; and

(b)50/50 market/RGI family housing development for three building forms (walk up, townhouse and high-rise)

The maximum number of units and the project financing for a typical two, three and four bedrooms walk up family housing development under various market and RGI units combination is shown in Figure 1 and Appendix III. For a project with 100 percent low end of market units ($1,040.00 per month), 145 units can be built using the $11.0 million from the sales plus an 8 percent mortgage of about $8.6 million for a total project cost of about $20 million. The debt ratio is about 44 percent. Construction cost per unit is estimated at $135,000.00. At the other end of the spectrum, only 66 RGI units can be built for a project cost of about $9.0 million. The remaining $2.0 million will be reserved to provide rental subsidies in order to maintain a RGI rent of $350.00 per month. This illustration demonstrates that the rental units provided by the Property Houses can be replaced in full if they are all low end of market units. At a 50 percent RGI units level, 46 RGI and 46 market units can be built for a total of 92 units.

The reason to use a walk up development for the above illustration is that this building form is found to be the most cost effective among three City standard building forms, namely, lowrise/walk up, townhouse and high-rise apartment buildings. Figure II and Appendix IV show the maximum number of units and the project financing at a 50/50 market/RGI ratio for typical lowrise/walk up, townhouse and high-rise apartment buildings. At this ratio, 92 walk up units can be built compared with 88 townhouse and 76 high-rise apartment units.

To summarize, a walk up development of up to 145 low end of market units may be built using the proceeds from selling the Property Houses plus appropriate mortgage financing. Mortgage financing may be used if affordable to maximize the total number of units built and, at the same time, to support the maximum number of RGI units on a self-financing basis. By reducing the number of market units, up to a maximum of 66 subsidized units can be created without external subsidies.

Option 3:Sell the portfolio and use the revenue to redevelop affordable and below market family housing units (2, 3 and 4 bedrooms) on the Housing Company's existing low density sites properties.

This option is identical to Option 2 with the exception of building on existing Housing Company land. By providing free land to the new development, the estimated construction cost of walk up building will be reduced by about $25,000.00 to $110,000.00 per unit. This assistance may also be in the form of City land. The Housing Company has a couple of low density projects nearing the end of the 50 years mortgage term. Redevelopment of these sites has been discussed.

Due to the lower construction cost, more units can be built under this option as illustrated in Figure III and Appendix V. For example, walk up project development of up to 216 low end of market units or a maximum of 78 subsidized units may be built using the proceeds from selling the Property Houses plus appropriate leverage or reserve. Linking the selling of the Property Houses with the redevelopment of Housing Company properties may be a strategic approach to deal with the lack of capital funding for redevelopment.

Conclusion:

It is clear from the waiting lists information that the need of affordable rental housing for families is currently greater in magnitude than any other group in the City. We believe it is urgent the City takes a position of leadership in the preservation of the existing affordable rental housing stock. The management or disposition of these houses must assist in addressing the current gap between supply and demand of affordable housing for families. All the options discussed above would increase the number of rent-geared-to-income family units while fulfilling "more affordable housing" - one of the nine strategies stated by the Mayor's Homelessness Action Task Force to break the cycle of homelessness.

The municipal housing company with over 220 properties (28,500 units) under management, has the expertise and commitment to ensure the public benefits are maximized while effectively levering these assets with a social objective. The scale of its operations ensures that existing tenants can be accommodated at no financial hardship and its community-wide approach to housing provides linkages with a wide variety of community agencies serving specific housing needs.

(Report dated September 25, 1998, addressed

to the Corporate Services Committee from the

Commissioner of Community and Neighbourhood Services

headed, "Disposition of City-Owned Property Houses")

Purpose:

To comment on the issue of the future disposition of the City-owned property houses.

Funding Source, Financial Implications and Impact Statement:

The implications of options for disposition of the Property Houses are addressed in separate reports from the City's Housing Company and the Commissioner of Corporate Services.

Recommendation:

It is recommended that:

The Corporate Services Committee give serious consideration to the proposal of the Housing Company Board that would transfer ownership of the Property Houses to the Company for affordable housing purposes, prior to considering other options that would result in their sale to the tenants or others at market value.

Background:

At its meeting of June 22, 1998, the Corporate Services Committee deferred a report from the Commissioner of Corporate Services with regard to the sale of the City-owned Property Houses and asked staff to explore, in consultation with local Councillors, a mutually beneficial arrangement for all of the properties. Corporate Services staff have been leading this process and will be reporting on a proposed arrangement for the Property Houses.

At its May 25^th meeting, the Board of Directors of the City's Housing Company (joint Board of Cityhome and the Metro Toronto Housing Company) asked its own staff to look at alternative methods to retain the Property Houses for social housing purposes. This report was adopted by the Board on September 14, and the resolutions of the Board have been forwarded to the Committee for consideration on October 9^th.

This report provides comments from the perspective of Community and Neighbourhood Services on the proposals being put forward by the Housing Company and the Corporate Services Staff.

On June 22^nd, Corporate Services Committee also asked staff to "identify clear guidelines as to what the City's specific criteria are for subsidized housing". This report also responds to that request.

Comments:

At this time, there is significant pressure on the City to respond to affordable housing needs in creative ways. The interim report of the Mayor's Task Force on Homelessness indicates that more than 80,000 people in Toronto are currently at risk of becoming homeless because they pay more than 50 percent of their income on rent. The report also points out that the cost of providing permanent housing ($22-30 per day for a rental apartment) is much cheaper than short term emergency housing (e.g. $30-43 per day for a hostel; or $101.00 per day for a contracted motel room with meal allowance). At its July meeting, Council adopted in principle an affordable housing development strategy to be pursued in the coming months. This strategy involves using City-owned property and policy tools in partnership with private and community groups, to develop affordable housing demonstration projects. With this in mind, it is important to consider whether the property houses are an asset that could support this strategy.

As they are currently managed, the rents for most of these houses are set at or just below private market levels. At this time, ten households are paying below market rents (i.e. geared to income), with the costs being covered by rent revenues from the other houses. Under the business plan for these houses, with market rents increasing over time (and overall rent revenues became greater) it was intended that Cityhome provide more RGI assistance within the portfolio (up to 50 percent of the 105 units). From an affordable housing perspective, the question at this point is whether to proceed with this plan or to consider other ways to use this asset. There are a number of options that are discussed below.

In May, the Board of Directors of the Housing Company (i.e. the joint Board of Cityhome and the Metro Toronto Housing Company) asked its staff to look at alternative methods to retain the houses for social housing purposes. On September 14, Housing Company staff reported back to the Board on options to increase the affordable housing impact of this asset. The Board has decided to recommend to the Corporate Services Committee that ownership of the houses be transferred to the City's Housing Company. In light of the long waiting list for affordable family housing, the Board is arguing that it is in the best position to utilize the asset. As discussed below, this could include enhancing the existing business plan to help more low income families or selling properties in order to build new affordable housing on existing Housing Company property.

Staff of the Shelter Housing and Support Division of Community and Neighbourhood Services have also been considering other uses of the houses that could serve the community need for affordable housing. In August, staff canvassed a number of community agencies that have experience in providing affordable housing and sought their ideas for alternatives to open sale of the houses on the market. A number of ideas have been received and are discussed below.

(1)Use of the Houses/Proceeds by the City's Housing Company:

The City's Housing Company (i.e. Cityhome) currently manages the houses under two leases (25 years for some houses, 49 years for others) from the City of Toronto, based on a business plan adopted by the former City Council in 1992. As there are no non-profit program subsidies available, the business plan requires that all operating costs be covered by rent revenues on the 105 units. Since the properties are mortgage-free (except for a $2.5M renovation loan), it is possible to provide below-market rents to a number of households in need. These households pay a rent-geared-to-income (RGI) similar to households living in non-profit housing.

The Housing Company's report identifies ways to enhance the management of the houses to assist a greater number of households. These options include making better use of rent revenues so that more RGI subsidies could be provided to needy households. This is based on waiting list information showing that 22,955 families are waiting for RGI housing in Toronto, but only 154 subsidized units are becoming available each year through turnover.

Other options include selling some or all of the houses and using the proceeds to develop new housing, potentially on existing Housing Company sites. The analysis shows that, on land owned by the Housing Company, the proceeds from the sale of the houses (assumed to be approx. $11M) could be used to leverage the construction of 216 low end of market units or up to 78 subsidized units in a walk-up building. On October 9^th, the Board will be advising the Committee of its strong support for allowing the Housing Company the opportunity to further explore the options for this housing stock with a view to maximizing the potential for social housing purposes.

(2)Uses of the Property Houses by Existing Community Agencies:

The Shelter, Housing and Support Division has received a number of ideas from community agencies for other uses of the houses that would meet affordable housing needs:

Conversion to Non-Profit or Co-operative Ownership:

The Co-operative Housing Federation of Toronto (CHFT) has been working with a group of property house tenants to develop a proposal that they plan to present to the Corporate Services Committee. CHFT supports the sale of individual houses to existing tenants, where they can afford to buy them. However, they propose that, where tenants do not wish to buy, the houses be sold to a non-profit housing organization committed to providing ongoing rental housing. They specifically suggest that houses be sold to existing scattered unit co-operatives, or local non-profits, based on the tenants' preference. Should existing co-operatives not be interested, CHFT proposes to work with the tenants to form a new co-operative.

At the time of writing, CHFT was in the process of contacting tenants in all of the property house units to determine the extent of the interest in this proposal. We would expect that, by the time of the Corporate Services Committee meeting that they would have some indication of the level of interest in this proposal. Should the City pursue this approach, staff would work with CHFT to seek written confirmation of the preference of the individual tenants involved, before proceeding.

CHFT indicate that they cannot finalize the financing plan for purchase by cooperatives without knowing the sale price of the properties, or at least the appraised value. They propose that coops obtain 75 percent of the purchase value through conventional financing (bank or credit union) and suggest a number of alternatives for the remaining 25 percent. The alternatives for second mortgage financing include the Risk Underwriting Fund of the Co-operative Housing Federation of Canada, or depending on the retained earnings or equity of existing cooperatives. Should the rent revenues be insufficient to cover the costs, they suggest the City consider retaining the land and sell only the houses themselves to the co-ops, sell at a reduced value, or take back a second mortgage at a below-market interest rate. All of these options would reduce the immediate proceeds from sale of the individual houses involved. It should ne noted that the proposal as it stands does not attempt to increase the affordability of the houses, and additional funding may be required in order to rent the units at below market levels. Further analysis must be done to test the feasibility of the proposal.

Two cooperatives that have been working with the tenants on this proposal include Dufferin Grove Housing Co-op which owns properties (62 units) on Dovercourt Road, Melbourne Avenue and Sorauren Avenue, and Wood Tree Co-op which owns 47 single family homes in the Dufferin Davenport area.

We believe this proposal merits further analysis, should Council decide to reject the recommendations of the Housing Company Board. For those houses where tenants are interested in becoming co-op members, Housing staff would be prepared to work with CHFT and local co-ops to develop the proposal further and to help arrange financing of the purchases by co-ops.

Lease of Larger Houses to Community Agencies to Expand Existing Programs:

A number of community agencies are interested in obtaining individual property houses in order to expand the housing options for their clients and expand their existing programs. Generally, these are well-established groups with significant experience managing housing, and they are interested in leasing houses rather than buying them. For example, Yonge Street Mission already operates two houses under the City's Single Housing Opportunity Program, in partnership with Cityhome. As noted in our May report to the Committee, there are five houses currently leased to community groups.

The following agencies have expressed interest in leasing houses, at a market rent level (or a negotiated rent based on what their clients can afford). These are preliminary expressions of interest from agencies, and based only on a cursory review of the properties by their staff. In addition staff are aware of several other community agencies that are interested in obtaining City-owned property for housing purposes, through purchase or lease. For example, Homeplace Non-Profit Homes has requested that City-owned vacant residential properties be donated to the group for affordable housing; and they have specifically identified certain houses in the Spadina corridor for this program.

(i)Yonge Street Mission - interested in houses in the Cabbagetown or Riverdale areas to serve street youth who are participating in YSM's employment/education programs and able to maintain stable housing;

(ii)Toronto Association for Community Living - interested in leasing larger houses for developmentally handicapped who are currently living in unstable housing in the community (e.g. poor quality rooming houses);

(iii)Dixon Hall - seeking houses to integrate into a program for formerly homeless/shelter usersAnglican Houses/Habitat Services - interested in large houses close to the existing John Gibson House program at 227A Crawford Street, to integrate into their existing programs serving individuals with mental health problems; and

(iv)Christian Resource Centre - looking for larger houses to accommodate single adults, comprising a mix of hard to house, economically disadvantaged and those more financially independent, as a joint venture with churches and private sector.

As there are no houses that are vacant and suitable for use by agencies, it is not possible to consider leasing houses to these groups at this time. However, we suggest that in those cases where the existing tenants and/or co-ops are unwilling or unable to buy houses, Housing staff be given the opportunity to examine the suitability of the house for community agency use (based on size and the proximity to existing agency programs) and to consult with the agencies that have expressed an interest to determine their interest in purchasing the houses before they are offered on the open market. Alternatively, should Council accede to the Housing Company's request to transfer ownership, the Housing Company could be requested to accommodate these agencies if possible, as it develops options for the houses.

(3)Co-Ownership or Conversion to Condominium:

It should be noted that one of the tenants in the fourplex units on Hubbard (1,3,5,7,13) and Wineva (2,4,6,8) has expressed an interest in creating a co-ownership or condominium arrangement for those units. Since the units have common furnaces, this may be worth exploring, provided that there is an interest among the other tenants. A number of issues need to be explored however. In the case of condominium conversion, the legal expenses may be significant and need to be identified. There are also issues related to the City's condominium conversion policies that need to be explored. In terms of co-ownership, it may be difficult to obtain private financing. We would suggest that the interest of the other tenants in this option be determined, and if they are willing, the tenants be requested to make a proposal demonstrating the feasibility of this approach.

Guidelines For Subsidized Housing:

Staff were also asked to "identify clear guidelines as to what the City's specific criteria are for subsidized housing". As noted above, the property houses do not operate under any social housing programs, nor do they receive any subsidies from such programs. Under the business plan adopted by the former City Council, the Housing Company (Cityhome) operates the houses on a break-even basis, and provides the equivalent of subsidized rents to a number of low income households (currently 10 households). In effect, the Housing Company lowers the rents on these 10 units to a level that the tenants can afford (i.e. 30 percent of household income), and covers the loss from the rent revenue of the other properties.

The business plan itself provides the guidelines for the provision of these rent "subsidies"; these are equivalent to the criteria for Rent-Geared-to-Income (RGI) subsidies in the non-profit program and other buildings operated by Cityhome or the Metro Toronto Housing Company. Rent levels are set according to the provincial RGI scale, and (with the exception of low income households who were already living in the houses when the business plan was put in place) any new low income households must be selected from the waiting list for social housing. In other words, the criteria for the "subsidized" housing units in this portfolio are equivalent to those of the non-profit housing program in general.

Conclusion:

In light of the pressures on the City to respond to affordable housing needs, the proposal from the City's Housing Company deserves serious consideration. We recommend that the Corporate Services Committee decide to recommend or reject this proposal in its entirety before considering other proposals to sell the houses at market value.

Contact Names:

Rob Cressman, Phone: 392-0601, Fax: 392-0548; Email: rcressma@toronto.ca.

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(Report dated October 7, 1998, addressed to

the Corporate Services Committee from

Councillor Layton headed, "Sale of Property Houses")

Purpose:

(1)To provide housing opportunities for some of the 40,000 households on the City of Toronto waiting list for affordable housing; and

(2)To ensure that the January 1999 recommendations of the Mayor's Homelessness Action Taskforce are not pre-empted by a Council decision to sell affordable housing.

Recommendations:

(1)That all vacant units in the City's "Property Houses" portfolio be immediately rented to households in the emergency shelter system and/or families and individuals on the City's Housing Connections waiting list;

(2)That the City retain the ownership of all houses in the portfolio and that the City Housing Company manage this stock in a manner that maximizes the number of affordable units available for low-income families.

or alternatively

(2)That the City delay any decisions to sell units in the Property Houses portfolio for 12 months to facilitate the review of recommendations of the Mayor's Homelessness Action Taskforce with regard to the use of municipal assets for the reduction of homelessness.

Background:

Evidence is mounting of an unprecedented housing crisis in the City of Toronto: 40,000 households languish on the City's waiting list, emergency shelters are operating beyond maximum capacity, and as of the beginning of October, the City has already had its first cold weather related death of a homeless individual.

As the dimensions of the crisis became clear, the City initiated a comprehensive review of homelessness programs and policies and has begun to chart a new course through the work of the Mayor's Homelessness Action Taskforce. In its interim report, the Taskforce identified the need for "a multi-year program for preserving existing stock and creating new supply that meets anticipated need for affordable housing" as one of its nine key strategies. While final recommendations will not be made until January of next year, the sale of the Property Houses would seem to be in direct contradiction of the key strategic directions already identified.

The Strategic Policies and Priorities Committee also submits the following report (November17, 1998) from Councillor Layton:

Recommendations:

(1)That the recommendations of the Corporate Services Committee (November 12, 1998) be adopted; and

(2)That recommendation Number 4 of the Chief Administrative Officer's report (November12,1998) be adopted.

Note: Recommendations 1, 2 and 3 of the Chief Administrative Officer's report are contrary to the motions adopted by both the Corporate Services Committee and the Community and Neighbourhood Services Committee.

Comments:

(1)How can Council (i) declare a homelessness disaster; and (ii) condemn OHC for selling houses and then turn around and sell its own houses without a fully developed housing policy?

(2)Should the Chief Administrative Officer and the Strategic Policies and Priorities Committee over-ride the clear position of two Standing Committees?

(a)Corporate Services Committee on November 9th recommended transferring the asset to the Housing Company and reaffirmed Council's decision to fill the vacant houses with people in need of family housing.

(b)The Community and Neighbourhood Services Committee on October 8th recommended that the 60 property houses be retained by the amalgamated Toronto Housing Company.

I urge the committee to follow the eloquently expressed advice of Councillors Feldman, Chong, King, Sinclair and the many others who spoke at their respective committees.

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The Strategic Policies and Priorities Committee also had before it the following reports/communications, which were circulated to all Members of Council with the agenda of the Strategic Policies and Priorities Committee for its meeting of November 17, 1998, and copies thereof are on file in the office of the City Clerk:

-(May 25, 1998) from the Corporate Secretary, Board of Directors of the City of Toronto Non-Profit Housing Corporation (Cityhome) and the Board of Directors of the Metropolitan Toronto Housing Company Limited (MTHCL);

-(June 18, 1998) from Ms. Peggy Birnberg, Executive Director, Houselink Community Homes;

-(September 18, 1998) from the Corporate Secretary, Board of Directors of the City of Toronto Non-Profit Housing Corporation (Cityhome) and the Board of Directors of the Metropolitan Toronto Housing Company Limited (MTHCL);

-(September 9, 1998) from Councillor Sandra Bussin, East Toronto - Ward 26;

-(August 21, 1998) from Ms. Kimberly L. Beckman, Davies, Howe Partners;

-(Undated) Appendix 2, entitled "Property Houses Survey";

-(November 5, 1998) from Mr. Joe Hayes;

-(October 30, 1998) from the Corporate Secretary, Board of Directors of the City of Toronto Non-Profit Housing Corporation (Cityhome) and the Board of Directors of the Metropolitan Toronto Housing Company Limited (MTHCL);

-(September 28, 1998) from Mr. Chris Papadatos and Mr. Harry Weisbaum;

-Appendix 2, a Property Houses Survey Form attached to the report (October 7, 1998) addressed to the Corporate Services Committee from Councillor Layton; and

-Clause No. 4 Of Report No. 10 of the Community and Neighbourhood Services Committee headed, "Disposition Of "Property Houses" Owned By The City Of Toronto", which was struck out and referred by Council at its meeting of October 28, 29 and 30, 1998, to the Strategic Policies And Priorities Committee for further consideration in conjunction with the report to be submitted to the Committee by the Corporate Services Committee on a corporate-wide policy for the sale of 'Property Houses', with a request that this matter be considered by the Committee during the afternoon session of its meeting or at a subsequent meeting.

(City Council on November 25, 26 and 27, 1998, had before it, during consideration of the foregoing Clause, the following report (November 20, 1998) from the City Solicitor:

Purpose:

The purpose of this report is to advise on various financial and other implications if City Council adopts the recommendations contained in Clause No. 8 of Report No. 24 of The Strategic Policies and Priorities Committee or, alternatively, if it were to adopt the initial recommendations of the Corporate Services Committee to that Strategic Policies and Priorities Committee meeting.

Funding Sources, Financial Implications and Impact Statement:

If City Council adopts the recommendations of the Strategic Policies and Priorities Committee contained in Clause No. 8 of Report No. 24 of The Strategic Policies and Priorities Committee, the Cityhome leasehold mortgage loan will be extended for up to one year. Consequently, the City's guarantee of this mortgage loan will also have to be extended for the same period.

Alternatively, if Council does not adopt the recommendations of the Strategic Policies and Priorities Committee but, rather, determines to take the action in Clause No. 28(a) of Report No. 17 of The Corporate Services Committee relating to each individual tenant being given the right to purchase his/her specific unit within any duplex, triplex or fourplex building, the City and/or the proposed amalgamated housing company (the "Housing Company") could incur very substantial implementation costs unless such transactions were structured as set out in the body of this report.

Recommendations:

(A)In the event that City Council adopts the recommendations of the Strategic Policies and Priorities Committee in this matter, then it is recommended that:

(1)the City's guarantee of Cityhome's leasehold mortgage loan respecting the Property House portfolio be extended for the renewal period of the leasehold mortgage, such period not to exceed one year;

(2)the Commissioner of Corporate Services, prior to recommending, after consultations with the Housing Company, that any duplex, triplex or fourplex properties be declared surplus, obtain confirmation from the Commissioner of Urban Planning and Development Services that the proposed use of the property as ownership housing does not contravene any City policy respecting the conversion of rental housing; and

(3)the appropriate City officials be authorized and directed to take all necessary steps to give effect thereto.

(B)In the event that City Council determines to adopt the initial recommendations of the Corporate Services Committee in this matter, then it is recommended that:

(1)the properties comprising the City's Property House portfolio be declared surplus, conditional upon the Board of Directors of the Housing Company or the Board of Directors of Cityhome and of The Metropolitan Toronto Housing Company Limited agreeing to accept a conveyance of the portfolio on the terms set by City Council;

(2)prior to offering to tenants any duplex, triplex or fourplex building (or any portion thereof) within the Property House portfolio, the Housing Company obtain confirmation from the Commissioner of Urban Planning and Development Services that the proposed use of the property as ownership housing does not contravene any City policy respecting the conversion of rental housing;

(3)consideration only be given to those Offers to Purchase from the tenants of the duplex, triplex and fourplex buildings made collectively by all the tenants living in each such building, on the terms and conditions outlined in the body of this report; and

(4)the appropriate City officials be authorized and directed to take all steps necessary to give effect thereto.

Council Reference/Background/History:

At its meeting of November 9, 1998, the Corporate Services Committee recommended to Council, among other things, that the ownership of the Property Houses be transferred to the amalgamated Municipal Housing Company and:

"(C)that existing tenants receive the right to purchase his/her own specific unit within any of the subject properties that are of the following type: a duplex, triplex or fourplex."

Subsequently, at its meeting of November 15, 1998, the Strategic Policies and Priorities Committee recommended to Council the adoption of the report (November 12, 1998) from the Chief Administrative Officer which recommended that Council adopt the October 26, 1998 report of the Commissioner of Corporate Services that was before the Corporate Services Committee on November 9, 1998, subject to certain amendments, including the following:

"(a)the City continue the management arrangement it has with the Housing Company and that the mortgages which expire on December1, 1998 be renegotiated and renewed for a period of up to one year,

The Strategic Policies and Priorities Committee adopted the report of the Chief Administrative Officer, subject to certain other amendments which do not directly relate to the subject matter of this report.

Comments and/or Discussion and/or Justification:

(a)Adoption of Strategic Policies and Priorities Committee Recommendations

One of the recommendations of the Strategic Policies and Priorities Committee was that the Property Houses mortgage, coming due on December 8, 1998, should be renegotiated and renewed for a period of up to one year. This is a leasehold mortgage which was given by Cityhome and guaranteed by the City. The principal amount of the mortgage outstanding as of the December 1, 1998 due date will be approximately $2,316,000.00. The interest rate for the renewal term will be lower than the current original rate because of the substantial drop in rates that has occurred over the past five years. If the leasehold mortgage is to be renewed accordingly, then the City's guarantee will have to be extended for the renewal period, such period not to exceed one year.

A key recommendation of the Strategic Policies and Priorities Committee was that the October26, 1998 report of the Commissioner of Corporate Services be adopted (subject to certain amendments which need not be discussed in the context of this report). That report contemplates the possibility of selling duplex, triplex and fourplex ("multiplex") properties to their tenants jointly, who would then be responsible for organizing the manner of their property tenure (for example, condominium ownership). There are six multiplex buildings within the Property House portfolio containing a total of 19 units. (In addition, there is one apartment building containing 17 units, but I am advised that the units in the apartment building will not be offered for sale.)

If any of the City's multiplex buildings are offered for sale in the manner contemplated, the intended conversion of these rental units to private ownership should not contravene any City policies. Policies respecting the conversion of rental housing, presently contained within the City of Toronto Official Plan, are currently the subject of review. Before any multiplex property is offered for sale to its tenants, the Housing Company should receive confirmation from the Commissioner of Urban Planning and Development Services that the proposed conversion of the property will not contravene City policies.

(b)Adoption of the Corporate Services Committee Recommendations

In the event that Council determines to adopt the recommendations of the Corporate Services Committee, then some further parameters on the transaction structure require delineation.

The conveyance of the Property House portfolio by the City to the Housing Company would constitute a disposition of surplus land and would therefore be subject to the provisions of By-Law No. 551-1998 governing the sale of real property. If City Council decides to carry out this conveyance, it should declare the Property House portfolio surplus, subject to the Board of Directors of the Housing Company or the Board of each of Cityhome and The Metropolitan Toronto Housing Company Limited agreeing to the City's terms of the transfer.

The Corporate Services Committee recommended that tenants in multiplex buildings receive the right to purchase their individual units. Again, before offering such units for sale, the Housing Company should obtain confirmation from the Commissioner of Urban Planning and Development Services that the proposed conversion of the property will not contravene City policies.

Recommendation No. (1)(C) of the Corporate Services Committee, namely, that individual units within the multiplex buildings be offered to their respective tenants on an individual basis, would require that the units first be made legally capable of being conveyed to each such tenant. This would have to be carried out by one of three legal methods, namely, creation of a condominium, an equity co-operative, or a co-tenancy. Because of the many issues and complexities involved in establishing individual unit ownership in multiplex buildings, I am recommending that the tenant/purchasers of multiplex buildings have full autonomy and responsibility in organizing their buildings in whatever way best suits their needs and preferences without Housing Company involvement. This would be accomplished by giving consideration to the actual sale of any multiplex property only after all the tenants in any such building jointly deliver an offer to purchase the entire property at a stipulated sale price. The offer would set out a closing date later than usual in order to give the tenants adequate time to agree upon the manner in which they would take title (that is, condominium, equity co-operative, co-tenancy) and to take all steps to arrange the necessary legal requirements and to enter into all necessary documentation between themselves. The cost of creating the legal entity to govern the property should be borne by the beneficiaries of the sale, the tenant/purchasers.

As each of these three options involves various legal complexities and entitlements, expenses, and potential property management issues, the tenants would have to decide at the outset which of these three methods to employ. This would entail a comparative examination of a multiplicity of factors such as the steps to be taken and documentation required for each method, the applicability of the City's rental housing conversion policies to each of the three conversion methods and the viability of obtaining mortgage financing with each method. The relative merits of all factors would then have to be weighed.

Although the establishment of condominium, equity co-operative or co-tenancy status differ in their technical details, similar issues would arise in each case. I will illustrate the nature of the process that would be undertaken by the tenants by reference to the process of creating a legal condominium. I will then discuss some differences in the case of equity co-operatives and co-tenancy. The process of creating a condominium would include the following steps:

(1)A detailed examination of each building would have to be made in order to determine which portion of the property should be registered under the Condominium Act as, respectively, residential units, parking units, common elements or exclusive use common elements (e.g. , shared use of common basements/yards or subdivision into individual entitlement areas?).

(2)Based on the decision reached as to how a multiplex property should be divided, an Ontario Land Surveyor would then have to survey the property and prepare a condominium plan, that is, a plan showing the division of the building into its various elements of units, common elements and other components, if any, at its several levels and through several cross sections.

(3)An analysis would also have to be made of each building in terms of organizational matters to be set out in the documentation required by the Condominium Act, the following being but some few examples:

(i)common expenses: how the differing location, size and amenities of units within one building will be allocated as to the sharing of expenses in unequal percentages; and

(ii)maintenance and repairs: what work (replacing roofs, doors and windows, as well as the more frequent issues of painting and repairs to various portions of the building) may be carried out by the unit owners independently and what work will require the approval of all of the owners in the building.

(4)A dispute resolution process would have to be established for cases where the number of votes for or against a matter are equal.

The establishment of an equity co-operative would entail the incorporation of a corporation which would hold title to the building. Each tenant would purchase a share and would also enter into an agreement with the corporation for occupying his or her unit. Although a survey of the property would not be required, and the format of the documentation would be different than condominium documents, the process of analysing the property and allocating areas of exclusive use (that is, the units) and common areas and determining the various rights and obligations of the owners, including how costs are to be shared, would be similar to that in establishing a condominium.

Under co-tenancy (legally called a "co-tenancy" although it is actually an ownership situation under which co-owners are called "tenants-in-common") , all of the owners own the property in common and grant to each other rights of occupancy of the specific units. A co-tenancy agreement must be negotiated and executed among all the owners, also addressing the issues discussed above.

In addition to providing the tenant/purchasers with full control over the organization of their building, the sale of multiplex buildings on a joint basis as proposed by this report would avoid the situation in which some units in one building will be owned by tenants and some by the Housing Company. That is, unless all of the tenants jointly purchase the property, a situation could easily arise where some, but not all, of the tenants in a building would decide to purchase, leaving the Housing Company as a part owner of the building. It is conceivable that many tenants would not want to share ownership of a building with a corporate owner such as the Housing Company but would want to own with other individuals, with whom they have a greater commonality of interest.

Any such mixed ownership situations would also presumably be problematic for the Housing Company. In such cases, the Housing Company would own the unsold unit(s) in the building, and management of the unit(s) would be more complicated and possibly more expensive because of the requirement of sharing property management decision-making and administration with the other owners.

Leaving the organizational process to the tenants of each multiplex by offering to sell them their buildings collectively would not only give the residents full autonomy in an area which affects them vitally, it would also mean that the Housing Company and the City would not be expending enormous staff effort and other expenditures in the complicated process of devising property ownership relationships for private individual ownerships.

However, if there was an absence of agreement by all affected tenants, then it would make little sense to proceed with other than a traditional "single" buyer. If the tenants in any particular multiplex building fail to agree, or are unable/unwilling to implement any initial agreement having been reached among themselves, then the property as a whole should be offered for sale to the tenant having the longest tenure.

Conclusions:

If City Council adopts the recommendations of the Strategic Policies and Priorities Committee, certain steps will have to be taken as outlined above.

Similarly, if Council adopts the recommendations of the Corporate Services Committee, staff should obtain confirmation of non-contravention of City policies respecting the conversion of rental housing before any multiplex units are offered for sale to tenants. Also, City Council should declare the Property Houses surplus, subject to the Board of the Housing Company or the Boards of Cityhome and The Metropolitan Toronto Housing Company Limited agreeing to accept the conveyance on Council's terms. The best method for units in duplexes, triplexes and fourplexes to be offered for sale to their respective tenants is for the tenants to be given the opportunity to buy their buildings collectively, that is, such that each building will be able to be organized in the manner preferred by its tenant/purchasers, and the complications and consequent expenses which would otherwise arise would not be imposed upon the Housing Company.

Contact Name:

Stanley Emerson - Legal Services - 392-8736.)

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