October 20, 1999

To: Community Services Committee

From: Commissioner of Community and Neigbourhood Services

Subject: Incentives for Private-sector Affordable Housing Development

Purpose:

To outline next steps regarding ways to encourage private-sector affordable housing development, a matter raised by Councillor Jakobek in his letter of October 12.

Financial Implications and Impact Statement:

No financial implications at this time.

Recommendations:

It is recommended that:

(1) The Commissioner of Urban Planning and Development Services and the Commissioner of Community and Neigbourhood Services report back to the January 2000 meetings of the Planning and Transportation Committee and the Community Services Committee, outlining an interdepartmental process to develop policies to encourage private-sector affordable housing development;

(2) The appropriate City Officials be authorized and directed to take the necessary action to give effect thereto.

Background:

The November 4 Community Services Committee agenda includes correspondence from Councillor Jakobek on "Development of a Rental Housing Program". A related proposal from Councillor Moscoe has also been widely circulated.

This report identifies the work to be undertaken and the intended process for staff response on these matters.

Comments:

Council in July 1998 adopted a framework for creating affordable housing, involving measures such as property tax reductions, financial and funding tools, demonstration projects, Official Plan and land use tools, advocacy with senior governments, and other elements.

The proposals now being put forward by Councillors involve specific City incentives and/or requirements to get developers of market housing to provide housing which is affordable to low or moderate-income tenants.

Councillor Jakobek's proposal involves a waiver of property taxes for 15 years, and full waiver of PST, development charges, and permit fees for new rental developments. In return for this, the developer would be obliged to lease 20 percent of the units at 50 percent of the market rent rate, and there would be a "fast track" approval process for such projects.

Councillor Moscoe's proposal involves a bonus (5 percent or another level as appropriate) to permit additional units to be built in new residential developments; this might be on a voluntary or mandatory basis. In return, the developer would be obliged to turn those additional units over, free of charge, to a non-profit housing agency (which could include Toronto Housing Company), and would be eligible for an income tax credit as a result.

The City has started implementing a strategy for affordable housing, building on the framework noted above and the recommendations of the Mayor's Homelessness Action Task Force. Some aspects of the strategy have been given ample attention while others, including incentives for the private sector, remain to be dealt with.

Housing Supply Activity:

Steps taken in 1999 in housing supply activity include:

(a) an $11 million capital revolving fund, for which a Request for Expressions of Interest has just been issued;

(b) a Mayor's Homelessness Initiative Reserve Fund for transitional housing and other community initiatives requiring capital;

(c) a reduced property tax rate for new rental housing;

(d) an exemption from development charges for non-profit rental housing;

(e) a "housing first" land policy.

Staff are advised that the Province will shortly make public the program rules for the related PST rebate it announced in March.

Broadening these Steps:

These tools will only produce housing on a small scale. Like Councillor Jakobek's proposals, the City initiatives underway are much influenced by US models. However, Toronto lacks the multi-million dollar annual federal and state capital support for housing received by any US city of comparable size.

To achieve results on a larger scale it will be necessary, as suggested in the Councillors' proposals, to engage the resources of the private sector and piggy-back on the large amount of development that it undertakes each year.

A Special Advisor - Housing Development has now been hired by the City. This role will be key in bringing about a broadened private-sector role. The mandate of this position is not only to be involved with not-for-profit housing but also to work toward alliances with the private development sector.

Official Plan Workplan:

Housing is a high priority in the City Planning Division workplan leading to the new Official Plan. This work will include examination of options to encourage provision of affordable housing by the private sector.

The proposals now being put forward by Council members involve some of the tools that must be looked at in that workplan. Intensive staff activity in 1999 focused on condominium conversion, second suites, and other matters. Staff can now make a priority of developing and bringing forward options in regard to incentives for affordable housing development.

Barriers and Issues:

Adequate analysis of the issues and options is needed before Council chooses a course of action on the proposed incentives. Issues and/or barriers include effectiveness of various tools, costs versus benefits, legislative powers of the City, and real and perceived effects on the viability of developments.

For example, in regard to property tax exemptions, Council will want to be satisfied that the benefits outweigh the costs and that the proposed incentives are likely to achieve the intended results. A solid case will have to be constructed that can persuade the Province to empower the City to provide such incentives, and that can withstand any challenges.

Likewise, there is a long history of experience with bonuses, incentives, and mandatory requirements in Toronto and in other cities. The feasibility of such tools has varied depending on prevailing economic conditions in the development industry and on the priority given to affordable housing vis-à-vis other concerns.

Some of the initiatives proposed by Council members would require provincial legislative changes. Property tax exemptions are a case in point. A major barrier to effective alliances with the private sector is the Municipal Act prohibition against "bonusing", that is, the provision of benefits to private firms. For example, the City could not legally make a capital contribution that purchases a lower rent (of equivalent value to the contribution) from a private developer.

Next Steps:

The ideas being put forward by Council members involve both a housing program dimension and an Official Plan and regulatory dimension. The work will therefore be led by staff from the City Planning Division and the Shelter, Housing and Support Division. An interdepartmental team will be required to ensure adequate consideration of legal and financial issues as well as aspects -such as streamlining of approvals-- that affect other departments.

As a first step, a joint report will be prepared, outlining the workplan for dealing with these issues. Given the subject matter, it should go to the Planning and Transportation Committee.

Conclusions:

Proposals from Councillor Jakobek and Councillor Moscoe pertaining to incentives for private-sector production of affordable housing are related to the City framework for affordable housing supply. Developing options regarding such incentives should now become a high priority in implementing the framework for affordable housing.

The ideas being put forward involve both a housing program dimension and an Official Plan and regulatory dimension. An interdepartmental team led by staff from the City Planning Division and the Shelter, Housing and Support Division will examine and bring forward options. A report outlining the proposed process will be prepared for the January 2000 meeting of the Planning and Transportation Committee.

This report was prepared in consultation with the Commissioner of Urban Planning and Development Services, who concurs with its recommendations.

Contact:

Joanne Campbell

General Manager, Shelter, Housing and Support Division

Tel: (416) 392-7885 Fax: (416) 392-0548

jcampbell@toronto.ca

Commissioner of Community and Neighbourhood Services