Proposed "Add-A-Suite" Incentive Program

The Community Services Committee recommends the adoption of the following report (June29, 1999) from the Commissioner of Community and Neighbourhood Services:

Purpose:

This report proposes that an "Add-a-Suite" program be created to encourage creation and upgrading of second suites (basement apartments etc.) through incentive grants and forgivable loans, and that the Federal and Provincial Governments be requested to cost-share such a program.

Funding Sources, Financial Implications and Impact Statement:

This report requests the Federal and Provincial Governments to contribute funding to the proposed program. City staff will report back on the level of municipal contribution once the level of funds available for the Mayor's Homeless Initiative Reserve Fund is confirmed. The Mayor's Fund is to be created using projected savings generated through anticipated lower social housing mortgage payments in 1999, compared to the provision for such payments in the approved 1999 budget for the Shelter, Housing and Support Program.

Recommendations:

It is recommended that:

(1)Council endorse the establishment of an "Add-a-Suite" incentive program, as outlined in this report, and write to the Honourable Steve Gilchrist, the Honourable Claudette Bradshaw, and the Honourable Alfonso Gagliano to seek provincial and federal funding contributions to the program;

(2)the Commissioner of Community and Neighbourhood Services and the Chief Financial Officer and Treasurer report back by October 1999 on:

(a)any commitments of funding from the Federal and Provincial Governments; and

(b)funds that could be made available to this program from the Mayor's Homeless Initiative Reserve Fund as a result of the underspending in the Provincial Housing Download service area; and

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

Council Reference/Background/History:

This proposal arises in connection with Council's adoption of the 1999 Operating Budget and the implementation of the Mayor's Homelessness Action Task Force recommendations.

Council at its meeting of May 11-13, 1999, adopted various recommendations on implementing the Report of the Mayor's Homelessness Action Task Force, including legalization of second suites. This included a request that the Commissioner of Urban Planning and Development Services, in conjunction with the Commissioner of Community and Neighbourhood Services, report on:

"ways to encourage homeowners to create second suites, including the feasibility, cost and possible source of funds for:

(i)a promotional campaign for homeowners;

(ii)education and support programs for small landlords; and

(iii)incentive programs (e.g., capital grants, interest free loans)".

This report responds to point (iii) above and should be read in conjunction with the related report to the July 12, 1999, meeting of the Planning and Transportation Committee, dealing with the other two points.

Comments and/or Discussion and/or Justification:

The Add-a-Suite Proposal:

The proposed "Add-a-Suite" program would provide funding to cover part of the costs of adding one or more units in existing residential properties. The objective is to offer a financial incentive, to support second suites as a major market-based way of creating affordable housing. Funding of up to $1,000.00 would be provided in the form of an "incentive" grant to homeowners, and larger amounts would be provided as a forgivable loan.

Successful precedents exist in the former provincial "Add a Unit" and "Convert to Rent" programs. Costs of creating such a unit are far less than the costs of building a new apartment unit or doing major renovation. The time to create such units is much shorter if no rezoning is required.

This initiative would support the proposed amendment of zoning by-laws, now being considered by Council, to permit second suites as-of-right in all single- and semi-detached houses, subject to standards being met. The Fund would be available both for creation of new units or for upgrading of existing ones. In either case, a relatively affordable unit is created that meets standards.

If Council approves these related initiatives, the City will be coming forward not just with by-law changes but also with complementary activities through a registration system, funding to create or upgrade units, and an education and support campaign for owners and tenants. Buildings staff also indicate that they are implementing a fast track process for building permits, that should speed up the approval process for second suites.

The City Solicitor has advised that the Municipal Act empowers the City to make grants and loans for such purposes if Council considers them to be in the municipal interest, as long as the prohibition on "bonusing" is adhered to, i.e., there is no provision of benefits to for-profit enterprises. The City also has power to require a mortgage or lien as a condition of funding.

Program Description:

The proposed guidelines for the program will be as follows:

(a)Eligible properties will be owner-occupied residences.

(b)Eligible work will be creation of a second suite, or upgrading of an existing second suite to meet standards.

(c )The Commissioner of Community and Neighbourhood Services may set criteria for approving applications for funding (for example, priority to new versus existing units, larger versus smaller units, above-grade units, earlier completion, etc.).

(d)Homeowners may apply for funding in one of two forms:

(i)an "incentive" grant of up to $1,000.00 to cover approved costs; or

(ii)a forgivable loan to a maximum of $15,000.00 per new unit, or a maximum of $10,000.00 per existing unit being upgraded to standard.

(e)Funding will cover only renovation or upgrading work determined by staff to be necessary to create the unit and meet standards, with costs established by quotes from building contractors.

(f)Units created with Add-a-Suite funding must meet the forthcoming City definition of "affordable housing".

(g)Each loan will be immediately repayable under conditions such as the property is sold, the unit is no longer rented, it fails to meet property standards, it is rented at levels exceeding the "affordable housing" definition, or other circumstances as determined by the Commissioner of Community and Neighbourhood Services.

(h)Conditions of funding for loans will be set out in a mortgage or will otherwise be secured by a registered collateral mortgage, in a form satisfactory to the City Solicitor.

(i)Loans will be forgiven at $1,000.00 per year or such other rate as may be established for the program by the Commissioner of Community and Neighbourhood Services.

(j)The Commissioner of Community and Neighbourhood Services will establish simple but adequate monitoring requirements for loans (such as an annual statement from the home-owner confirming that the unit is still occupied and reporting the rent levels, or other steps as appropriate).

(k)Other criteria related to the applicant's ability to repay the loan (e.g., satisfactory credit rating, amount of equity remaining if other mortgages are registered on title).

In broad terms, the proposed conditions of assistance are similar to those used in the federal Residential Rehabilitation Assistance Program (RRAP) with which staff have experience. The requirement to meet the forthcoming "affordable housing" definition will be a condition of other forms of City assistance as well (for example, from the Capital Revolving Fund for Affordable Housing).

Funding Sources:

Senior levels of government should be requested to contribute funding to this program. The Federal Government could support this initiative through the existing RRAP program or through a separate funding allocation. Currently RRAP provides loans of up to $18,000.00 per homeowner for essential repairs; however, the annual RRAP allocation to Toronto is limited, and falls far short of meeting the current level of need. To support a new Add-a-Suite initiative, the Canada Mortgage and Housing Corporation would have to (a) modify the program guidelines to make the upgrading or addition of second suites a valid use of program funding, and (b) increase the funding allocation to Toronto for this purpose on a one-time or annual basis.

The source of municipal funding for the Add-a-Suite program could be the Mayor's Homeless Initiatives Reserve Fund, to be established using savings generated through lower mortgage payments within the Provincial Housing Download (social housing subsidy) in 1999. Allocation of funds to the Mayor's Fund will depend on confirmation of underspending in social housing subsidy. Staff are expecting a firm picture of underspending much earlier this year than was the case in 1998. The actual picture depends mainly on mortgage renewals through the year; the City must be satisfied that monthly provincial billings reflect actual ministry costs so that there is no year-end "surprise". Provision of such financial information from the Province is improving. The Province has indicated that monthly 1999 billings are being based on monthly rolling reconciliations (including the effects of mortgage renewals through the year). This contrasts with 1998 when billings were based on the 1998 Ministry budget and no solid information on actuals was available until after year-end.

Staff expect to be in a position this fall to confirm actual social housing costs for the first several months of 1999. This will enable a portion of the projected social housing subsidy savings to be allocated to the Mayor's Homeless Initiative Reserve Fund, while still allowing sufficient cushion for any unexpected increase in social housing subsidy cost in late 1999. The Commissioner of Community and Neighbourhood Services and the Chief Financial Officer and Treasurer will report back on this matter by October 1999.

Delivery Process:

The program would be delivered by housing program staff in the Shelter, Housing and Support Division. This would be a useful follow-up to the successful rental and rooming house RRAP program of earlier in 1999. Inspections would be co-ordinated where appropriate with Municipal Standards, Buildings, and Fire.

Staff will report further on the staffing implications of the proposed program. It is estimated, based on experience in home repair programs and a review of those programs undertaken in spring 1999, that approximately one FTE would be required for delivery (less than 1 percent of expected program cost). This would be a temporary position for the duration of the Add-a-Suite program, and could likely be filled through secondment of existing City staff.

Associated Information/Education Program:

As noted, the Add-a-Suite program would go hand-in-hand with zoning by-law changes, a registration system, and an education and information campaign. The information and education campaign is the subject of a report to the Planning and Transportation Committee at its July12,1999, meeting. The proposed education program includes written materials (workbooks, pamphlets), promotional materials (media advisories, fact sheets) and information sessions, to be developed by City staff and by a partnership of the Landlord Self Help Centre and Housing Help Centres. The initial program would operate late fall and winter 1999, to coincide with adoption of the second suite by-law and the Add-a-Suite program (all subject to Council approval). If the program is successful, and there is demand, it will be delivered again on an expanded basis in 2000.

This report was prepared in consultation with the Commissioner of Urban Planning and Development Services, the City Solicitor, and the Chief Financial Officer and Treasurer. In addition, staff in Financial Services, Budgets provided comments on the financial implications of creating the new Mayor's Homeless Initiative Reserve Fund

Conclusion:

A program of loans and grants to home-owners is proposed, to support the creation of second suites and the upgrading of existing ones to meet standards. The basic framework of program guidelines has been developed, building on precedents in other successful programs. The proposed phase 1 would be implemented in fall 1999, once funding is approved, and be accompanied by an education and promotion campaign. Further phases of the program would be implemented in 2000, conditional on by-law changes being approved by Council and the OMB, and on availability of funds from confirmed underspending in social housing subsidy.

Contact Name:

Joanne Campbell

Tel: 392-7885/Fax: 392-0548