Special Funding Under the Federal Residential

Rehabilitation Assistance Program

The Community and Neighbourhood Services Committee recommends the adoption of the following report (March 10, 1999) from the Commissioner of Community and Neighbourhood Services, subject to amending Recommendation No. (4) to read as follows:

"(4)(a)the Chief Financial Officer and Treasurer, in consultation with the City Solicitor, be requested to report directly to Council on a financing mechanism by which the acceptance of RRAP loans for 11 Ordnance Street, 349 George Street and 156-158 Munro Street could be achieved; and

(b)subject to the approval of a satisfactory financing mechanism, Council approve the City's acceptance of the RRAP loans; and":

Purpose:

This report outlines progress in delivering the special Residential Rehabilitation Assistance Program (RRAP) funding announced in December for rental and rooming house properties as a Federal response to homelessness, identifies broader implications, and makes related recommendations.

Funding Sources, Financial Implications and Impact Statement:

RRAP provides federal housing repair loans directly to property owners. The City delivers the program with existing staff resources, receiving CMHC payments on a fee-for-service basis. Funding is expected to include part of needed capital repair costs of three City-owned properties.

Recommendations:

It is recommended that:

(1) the Mayor be requested to write to the Minister responsible for Canada Mortgage and Housing Corporation (CMHC), commending the federal allocation of $50 million additional funding for rental and rooming house properties under the Residential Rehabilitation Assistance Program, and requesting that the enhanced funding be provided annually;

(2) staff be authorized to deliver the special RRAP allocation and, for that purpose, the City enter into agreements with CMHC, to the satisfaction of the City Solicitor;

(3)CMHC be requested to increase the flexibility in use of RRAP funds, to clearly cover cases such as non-residential conversion, addition of units, emergency shelters, properties with CMHC mortgages, block commitments for experienced non-profit agencies, and other housing needs for homeless and at-risk people;

(4)Council approve the City's acceptance of RRAP loans for City properties at 11 Ordnance Street, 349 George Street, and 156-158 Munro Street, and City provision to CMHC of loan security in lieu of mortgages, and request the Chief Financial Officer and Treasurer and the City Solicitor to report directly to Council on an appropriate financial instrument or arrangement; and

(5)the appropriate City officials be authorized and directed to take the necessary action to give effect to these recommendations.

Background and Issues Emerging:

The Special RRAP Funding and Steps Taken to Deliver It:

The Federal Government on December 18, 1998, announced $50 million nation-wide in additional one-time Residential Rehabilitation Assistance Program (RRAP) funding, as a step to address homelessness. This is an addition to the existing $50 million annual national budget for RRAP.

It is understood that approximately $13.5 million is being allocated to Ontario, of which about half will go to projects in the City of Toronto. The new funding is targeted mainly at rental housing and rooming houses. This is a large increase from recent funding levels of $0.5 to $1.0 million annually for home-owners and disabled in the new City, and a similar amount for rental and rooming houses.

The special funding is being delivered by the City on behalf of CMHC, on a fee-for-service basis. The City is a delivery agent for RRAP under existing agreements with CMHC. CMHC contacted City staff in January to request City delivery of the new funding, given the City's knowledge of the rooming house and low-rent housing sector, and its ability to identify doable projects to implement the "homelessness" priority. New agreements with CMHC in the usual form are required for the special allocation. (General background on RRAP and the delivery role is contained in an appendix.)

The special funding has tight timeframes. It must be committed to specific projects (but not paid out) by March 31, 1999. Advertisements were placed in January in the Toronto Star and Metroland community newspapers, and an information sheet went to existing community mailing lists. Staff wrote to Councillors in January, advising of steps under way and providing an information sheet to distribute to interested constituents. CMHC's deadline for initial project proposals was January 20.

Despite the time frame, proposals were received for 170 properties involving potential funding of $30 million. Included were a few City-owned properties and City-funded shelters: the Ordnance transitional youth shelter, the 349 George Street "Schoolhouse" shelter for men, Bellwoods House for homeless women, and a pair of houses in the East End. A separate report deals with the related management agreement for 349 George Street.

Staff are now in the process of inspecting properties and advising owners on scope of work and contractors' bids, leading to final recommendations to CMHC for commitments of funding. Commitments are being made by CMHC in batches as this work progresses.

Funding is expected for approximately 50 properties containing 400 rooms and 100 apartment units, involving work of approximately $6.5 million, all subject to final CMHC approval. The 400 rooming house units being upgraded amount to about 10 percent of the City's licensed rooming houses. Some flexibility is hoped for on the March 31 deadline. City staff have attempted to provide staff at CMHC's Ontario office and Centre for Public-Private Partnerships in Housing with the information they need to advocate for the most flexible approach to the new funding.

Issues Arising Regarding More "Flexibility" in RRAP:

Flexible CMHC application of RRAP rules is key to effective targeting of funds toward the stated priority of housing for people who are homeless or at risk. Under amendments to the National Housing Act now ready for second reading, CMHC will soon have much more flexibility in RRAP rules. In the meantime, there are grey areas and CMHC staff are attempting to interpret rules and time frames flexibly to meet the needs (see details below).

The main CMHC limitation is that properties funded by RRAP must already have been in residential use of some sort. A second limitation is that the properties must not be receiving other CMHC assistance. CMHC staff have worked to meet the City's need for flexibility, with progress as follows:

Abandoned Apartment Buildings: Such properties are rare in Toronto, but are high priorities for rehabilitation. A proposal was received to rehabilitate one significant abandoned apartment property. Negotiations are proceeding with the owner, interested non-profit groups, and CMHC about project scope and feasibility, and terms of CMHC support. Such projects require considerably more than a three-month planning time frame, and CMHC flexibility on timing will be essential if this project is to proceed.

Conversion of Non-residential Properties: There is considerable potential to create affordable housing by converting non-residential properties. One private site and one City-owned site were the subject of proposals or preliminary discussions with CMHC. At this stage, CMHC is unable to approve projects for RRAP when there has been no prior residential use.

Hostels and Shelters: Needed upgrading or expansion of emergency or transitional shelters meets the immediate needs of homeless people. Early staff review with CMHC included shelter sites, both community-based and City-owned. CMHC is able to approve RRAP for transitional shelters where there is longer-term residency with some form of user contribution to the costs. Funding is likely for a portion of the Ordnance transitional youth shelter and for upgrades to Bellwoods House shelter for women. The many community-based shelters with CMHC mortgages are ineligible for additional CMHC funding through RRAP - an area where more flexible CMHC rules would be warranted.

Rooming House Additions, Conversions, and Other Issues: Most rooming house proposals were for much-needed upgrading. Several proposals were to add units to existing rooming houses, some to rehabilitate disused legal units, and some to convert properties to rooming houses. Some additions of units are expected to be funded. Conversions more often involve committee of adjustment applications that require longer time frames and raise neighbourhood issues. Proposals were received from two experienced non-profit organizations for a block commitment to upgrade rooming house properties yet to be identified. These organizations, Habitat Services and Rupert Residential Services, have a track record in such work in collaboration with the City. Staff believe a block commitment would support systematic strategies to preserve and upgrade rooming houses, and that there should be greater CMHC flexibility to permit this.

Second Suites: Almost 50 proposals were received to create or upgrade basement apartments. Issues raised by this include zoning and committee of adjustment applications, high cost per property to administer RRAP, potential volume of proposals, and possible ways to target the units to low-income people. Staff are looking at the possibility of a pilot project within 1999/2000 RRAP funding, with community agency partners, to work through these issues.

Non-profit Housing: Older non-profit housing, some of it rehabilitation projects of the 1970s, sometimes has a need for capital repairs that exceed what can be paid for from replacement reserves. The presence of existing CMHC agreements for funding or mortgages makes these projects ineligible for RRAP funding. More flexible CMHC rule would be warranted for such properties, particularly those not receiving ongoing federal funding.

In summary, greater flexibility in RRAP rules and regulations, along with longer time frames for application and approval, are needed to permit more effective use of RRAP to address homelessness. Flexibility should include funding to convert non-residential properties to housing, block commitments for experienced non-profit agencies collaborating with the City, and upgrading of non-profit properties with existing CMHC agreements but no ongoing federal funding. Longer time frames between applications and funding commitment are needed for larger projects, rehabilitation of abandoned buildings, rooming house additions, and other cases needing more up-front planning.

Security in Lieu of Mortgages on City-owned Sites:

Each RRAP loan is secured by a mortgage (usually a second mortgage). As long as the property continues to be occupied by a low-income home-owner or to have rents below median market levels, the loan is gradually forgiven over a period of years. If it ceases to meet those conditions, the loan becomes payable.

The Municipal Act does not permit the mortgaging of City-owned properties, and restricts the types of debt that municipalities can issue. This presents a potential barrier to receiving RRAP funding for City-owned properties. City and CMHC staff are therefore exploring alternatives to mortgages for the three City-owned properties recommended for RRAP funding. This is a matter of urgency due to CMHC commitment deadlines. This report therefore recommends that the Chief Financial Officer and Treasurer and the City Solicitor report directly to Council on means to provide security for the CMHC loan in a form satisfying the requirements of provincial legislation, the City, and CMHC.

Meanwhile, it will help CMHC to move toward committing funds on these two applications if the City can give comfort to CMHC about security for their loans. This report therefore also recommends that Council confirm its willingness to receive RRAP loans for these properties and enter into a mutually agreeable alternative to mortgages.

Broader Implications for the City:

Broader implications include the higher funding level, and the City delivery role. The funding level is approximately what was recommended by the Homelessness Action Task Force. The large volume of proposals received indicates the potential need and take-up of this sort of funding. The much larger than usual Toronto share of the Ontario allocation reflects both the concentration of need here and also the City's ability to identify suitable projects and deliver the program.

This allocation represents the first amalgamated City-wide delivery of rehabilitation funding. RRAP has been delivered differently in different former municipalities (see appendix). Rental and rooming house projects were previously been selected through a direct CMHC proposal call - although once selected, projects were administered by the City or other local delivery agents.

The range of responses to the proposal call demonstrate how rehabilitation funding can directly preserve or create low-rent housing for people who are homeless or at risk. Examples include rehabilitation of abandoned apartments, creation of rooming house units, upgrading of basement apartments, and transitional shelters. It will be very useful for the City to be able to combine rehabilitation funding with other resources as part of its affordable housing development strategy.

Broader Implications at the Federal Level:

The special funding, like other RRAP funding, comes from a portion of the savings realized by CMHC on its housing subsidies in recent years, estimated by CMHC officials at $150 million annually. Such savings result from cheaper mortgage payments, spending constraints, and other factors in social housing programs. Many voices including municipalities and government Members of Parliament have been advocating a renewed federal involvement in housing. One route is through this kind of reinvestment of federal housing savings back into housing, which can be done even while administration of social housing programs is devolved from CMHC to the provinces.

The RRAP announcement appears to be an initial response by the Federal Government to such concerns. The Federal Government should be commended on its RRAP initiative, but it is important that it be more than a one-time use of year-end funds. One year of $7 million or less in Toronto does not amount to a major new federal commitment. This funding should be continued on an annual basis, and the flexible use of the funding should be expanded and confirmed.

While rehabilitation is important, RRAP can never fully address the need for new housing. The test of the seriousness of federal response to the Homelessness Action Task Force will be whether the government follows up with other initiatives that support partnerships for new housing.

In certain provinces, RRAP is a federal/provincial cost-shared program, and it represents an area where Ontario could choose to direct some support to housing in a very contained way.

Conclusion:

Staff are actively delivering the City share of the special federal Residential Rehabilitation Assistance Program (RRAP) announced in December 1998. It is targeted at rooming houses and low-rent apartments, to help address the housing needs of homeless people and those at risk. RRAP pays for necessary repairs to housing, while maintaining affordability for low- and moderate-income home-owners and tenants. The City is paid a fee by CMHC to deliver the program. This is the first time the existing City staff role in rehabilitation programs is being carried out across the new City.

It is anticipated that final commitments will be made for about 50 properties containing 500 units. This includes funding for upgrading of rooming houses, apartment buildings, and transitional shelters, and rehabilitation of abandoned units. The new special funding can be used more flexibly than previously possible, but further CMHC flexibility is warranted to permit a greater range of projects to be done. The volume of interest in the new funding shows that annual funding on this scale would be appropriate to the scale of needs.

Loans for City-owned properties require working out a form of security in lieu of mortgage that the City can provide to CMHC in return for its forgivable loan. As this is a matter urgency due to CMHC commitment deadlines, the Chief Financial Officer and Treasurer and City Solicitor will report direct to Council on it.

The funding represents an initial federal response to rising concerns about low-income housing and homelessness. Further and fuller responses are needed, especially in new housing.

Contact Name:

Joanne Campbell

Tel: 392-7885

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Appendix

Background on the Residential Rehabilitation Assistance Program (RRAP)

RRAP is a program of Canada Mortgage and Housing Corporation (CMHC), in existence since the 1970s. RRAP provides forgivable loans for necessary repairs to housing, while maintaining affordability for low-and moderate income home-owners and tenants. Funding covers essential repairs to main structural elements, roofs, walls, and windows, plumbing and wiring, and improvements to meet Ontario Building Code and Fire Code requirements, plus disability needs.

RRAP is provided in several streams: low- and moderate-income home-owners, home modifications for disabled people, and repairs to rental housing and rooming houses. For home-owners and disabled, the City delivers the program in the former Cities of Toronto, Scarborough, and York, while another party delivers it in other areas. The City can deliver the new RRAP funding under existing agreements with CMHC.

"Delivering" RRAP involves receiving proposals, determining eligibility and priority, reviewing applicants' financial situation vis-a-vis loan criteria, determining the scope of work and the costs for each property, reviewing contractors' quotations, recommending proposals to CMHC for approval, inspecting the work, authorizing advances of CMHC funds, and communicating with applicants as necessary during the process. Through agreements with CMHC, the City receives an administrative fee for each project delivered. RRAP loans do not flow through the City budget.

The City has experience in delivering other rental rehabilitation programs over the years, notably the former provincial Low Rise Rehabilitation Program, the special rooming house funding made available under that program in 1991-93, and Contract After Care funding to upgrade standards in boarding homes funded through Habitat Services to house psychiatrically disabled residents.

Eligible RRAP costs are up to $18,000.00 per home-owner or self-contained rental unit, and up to $12,000.00 per rooming house unit. Recipients must be below certain income limits or, in the case of rental housing, must maintain it as a rental property with rents below median market levels in Toronto. Each loan is gradually "forgiven" over a period of years as long as the owner or tenants continue to meet these criteria.