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Ontario Alternative Budget 2003

State of the Crisis, 2003:Ontario housing policies are de-housing Ontarians

By Michael Shapcott

Canadian Centre for Policy AlternativesISBN 0-88627-315-3

March 2003

CAW 567

2 Canadian Centre for Policy Alternatives


State of the Crisis, 2003 3

Technical Paper #2

State of the Crisis, 2003:Ontario housing policies are de-housing Ontarians

Ontario has lost 45,000 private rental unitsover the past eight years. The province hasalso lost 23,300 affordable social housingunits, along with another 59,600 affordablesocial housing units that should have beenbuilt. Tenants face a growing affordabilitysqueeze as rents in existing units have in-creased significantly since 1995 – as much as30% or higher in some areas – at the sametime that renter household incomes have beenstagnant or declining.

It wasn’t supposed to be this way.No matter who’s measuring, the need for

affordable rental housing has been growing.Canada Mortgage and Housing Corporation,the federal government’s housing agency, es-timated in 1997 that Ontario needed 120,000new rental units from 1996 to 2003 (about16,000 per year from 1996 to 2001, and20,000 per year since then). The mid-rangescenario from the Ontario Ministry of Financepopulation projections puts the need at18,400 new rental units annually – that’s147,200 homes from 1996 to 2003.

Since 1995, the Ontario government hashad a set of housing policies that it promisedwould deliver tens of thousands of new rentalunits and, at the same time, provide rent sub-sidies to low and moderate-income renterhouseholds to help them cope with risingrents.

But, instead of plenty of new units, On-tario is sliding backwards. Despite a solemn

“guarantee,” the government has offered al-most no help at all to low-income householdsfacing rapidly rising rents. And it has cut shel-ter allowances to hundreds of thousands ofthe province’s poorest households.

Tenants in Ontario’s 1.4 million rentalhouseholds live in the worst of all possibleworlds. The supply of affordable rental unitsis declining and rents are increasing as the needfor new affordable rental housing grows. So-cial housing waiting lists have grown from twoyears in 1995 to as much as ten years or more.Homelessness is up everywhere in the prov-ince.

Government housing policies are de-hous-ing low-income, moderate and even middle-income renter households instead of givingthem access to good quality, affordable homes.

Tory plan:Private salvation for renters

Ontario’s Progressive Conservative Party gov-ernment, elected in June of 1995, said it coulddeliver tens of thousands of desperately-needed new affordable rental units. In theCommon Sense Revolution, the Tory pre-elec-tion manifesto, party leader and future Pre-mier Mike Harris promised:

“We will end the public housingboondoggle that profits only the large



property developers and return to a shel-ter subsidy program for all Ontarianswho need help in affording a decent levelof shelter. By spending money on peo-ple instead of bricks and mortar, we willbe in a position to eliminate the two-year waiting list for affordable housing.”

In 1995, the new government put its faith,and the rental housing needs of low, moder-ate and middle-income Ontarians, in the pri-vate market. Their radical experiment calledfor:

• An end to government subsidies for newco-op and non-profit housing. Social hous-ing had been a key element of affordablehousing policy federally and provinciallysince the late 1940s. The governmenthoped that by eliminating new not-for-profit housing, private developers wouldstep in to create new affordable units.

• Major changes to rent regulation laws toallow rents to rise to their “natural level.”Landlords were expected to use massiverent increases to pay for repairs and alsofund new units. At the same time, the gov-ernment hoped that the “discipline” of themarketplace would allow rents to moder-ate as new units came on stream.

• Elimination of the Rental Housing Protec-tion Act, which had given municipalitiesmodest powers to control the demolitionor conversion of affordable rental housing.

• Shelter subsidies to low-income householdsto cushion them from big rent increases.

As Ontario’s rental housing crisis grewsteadily worse, and the private market failed

to deliver new units, the government added anew element. It offered public subsidies di-rectly to private developers to invest in newunits.

Private lobbyists meetprivately with Minister

On September 14, 1995, Ontario Ministerof Municipal Affairs and Housing Al Leachmet privately with representatives of six pri-vate sector lobby groups: Fair Rental PolicyOrganization, Greater Toronto Home Build-ers’ Association, Metropolitan Toronto Apart-ment Builders’ Association, Ontario Associa-tion of Architects, Ontario Home Builders’Association and the Urban Development In-stitute of Ontario. The lobbyists brought along wish list, including:

• an end to rent controls;

• repeal of the Rental Housing Protection Act;

• substantial changes to the Landlord andTenant Act to fast-track evictions througha politically-appointed tribunal;

• a legislated end to an attempt by the On-tario Human Rights Commission to pre-vent rental discrimination based on in-come; and,

• a radical overhaul of building regulationsto cut costs for builders.

The lobbyists insisted that no one elseshould be at the table. “The industry musthave a prominent voice on these matters rela-tive to other interested parties because it isthe building community that understands what


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will and will not work,” the lobbyists warnedthe minister (italics in their original docu-ment). Minister Leach, and subsequent min-isters, agreed. Tenants, homeless people andnot-for-profit housing developers and provid-ers that had successfully developed hundredsof thousands of cost-effective, affordable so-cial housing units have been largely excludedfrom talks about new housing policy over thepast eight years.

The private interests wanted lots ofchanges, but they never actually promised thatthese changes would lead to a specific numberof new units. All they said was that their planswould “encourage the development and con-struction of private rental housing in On-tario.”

Minister Leach commissioned a studybased on the lobbyists’ demands. The reportcalled The Challenge of Encouraging Investmentin New Rental Housing in Ontario was releasedin November of 1995 and gave the govern-ment the go-ahead it needed to take action.

But even this detailed report hedged onwhether the massive changes would actuallycreate any new affordable units. It concludedthat the changes “will encourage more build-ing. How much? That is impossible to say.However, it seems likely that the regulatorychanges alone will not be enough to stimu-late substantial amounts of rental investmentin Toronto, which presents the most seriousproblem for rental supply in Ontario.” Thereport states:

“New private rental projects will tar-get the high end of the market. Theeconomics of building rental housingdictate that the new product will havehigher than average rents. This is thetraditional market for new rental hous-

ing. Product at the high end of the mar-ket is beneficial to all segments since itattracts tenants from the existing lower-rent stock – thereby creating vacanciesat more affordable rents.”

In other words, the most that can be ex-pected is some new high-rent units. And then,through the magic of the private market, per-haps some of those vacancies may trickle downto the hundreds of thousands of low andmoderate-income renter households whichneed affordable homes.

Private sector makes donations

The Ontario government was quick to obligethe private lobbyists, and they, in turn, madesubstantial financial contributions to the Pro-gressive Conservative Party and its candidates.

Five of the six groups at that key meetingwith Minister Leach in October of 1995 (FairRental Policy Organization, Greater TorontoHomebuilders Association, Metropolitan To-ronto Apartment Builders Association, On-tario Home Builders Association, Urban De-velopment Institute Ontario) have donated atotal of more than $60,000 to the governingConservative party since 1995. Two-thirds ofthose donations have come since 1998, whenthe government implemented the most im-portant changes (the repeal of the Rental Hous-ing Protection Act and the gutting of rent regu-lation rules).

But these weren’t the only private rentalinterests that have made substantial financialcontributions. For instance, Greenwin Prop-erty Management calls itself as “one of Cana-da’s largest property managers” and “Ontario’slargest private manager of government-spon-sored developments.” It has given more than



$100,000 to the governing Tory party since1995, almost half of that ($46,000) during1999, a provincial election year.

Plenty of other private housing interestshave also donated to the Conservative Party.

Minister gives his guarantee

Although neither the private lobbyists nor theprovince’s own study said that the changeswould actually create new affordable units, theOntario government was determined to pro-ceed. On October 11, 1995, Minister Leachrose in the Legislature to declare:

“We’ve stated quite clearly that it’s theintention of this government to get outof the non-profit housing business andget out of the co-op housing business.We believe we should put our supportbehind providing shelter allowances topeople who need it and not throwing itinto bricks and mortar.”

One week later, Minister Leach again roseto state:

“This government has made a commit-ment to get out of the non-profit hous-ing business. . . This government livedup to and fulfilled that commitment. Wealso committed to introduce a sheltersubsidy program to assist those mem-bers of our society who truly require helpin their housing needs. I can guaranteeyou that we will live up to that questionas well.”

Faced with tough questioning from oppo-sition politicians, Minister Leach said:

“The minister and the ministry, as wespeak, presently are developing the de-tails of the program. It’s going to be anextensive program, as I mentioned.We’re going to ensure that it will pro-vide benefits to tenants, benefits theydon’t have now, protection they don’thave now. I’m very pleased to advise thatwe will be bringing forward a programfor the shelter allowances perhaps veryearly in the new year, as quickly as thepeople in the ministry can get the factstogether, and we can continue to do that.Again, what we’re interested in is notbricks and mortar; we’re interested inproviding protection to the tenants ofOntario.”

“Our number one goal is to put a systemin place that will give builders an incentive toget out and build new stock,” said MinisterLeach in a newspaper interview in Decemberof 1995. He predicted 20,000 new rental unitsin Toronto alone as a result of his government’spolicies. “And we have to make sure we putin a [rent regulation] system that provides ten-ants with the confidence that they won’t begouged by landlords.”

In April of 2000, there was a sign that thegovernment realized that the private sector wasnot delivering any new affordable housingunits despite generous concessions. Ministerof Municipal Affairs and Housing Tony Clem-ent told The Toronto Star the government haddelivered and now it was time for private de-velopers to start building. Clement said:

“They are running out of excuses. I amnow calling upon the industry to puttheir money where their mouth is. We’veremoved the impediments and we’ve got


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to see activity in this sector. It’s time tofish or cut bait.”

Stephen Kaiser, President of the Urban De-velopment Institute, dismissed the Minister’scomments, saying: “he doesn’t understand theindustry and that’s shocking.”

Minister Clement and the rest of the On-tario government lapsed into an embarrassedsilence and returned to the housing strategythey’ve had in place since 1995. New afford-able housing must come from the private sec-tor. Period.

Social housing losses: 82,900 units

In June of 1995, the Ontario government can-celled 17,000 units of co-op and non-profithousing that had previously been approvedfor development. About 20,000 units were onthe chopping block, but housing advocatesrallied to save 3,000.

Minister Leach also cancelled all fundingfor new co-op and non-profit development.Until those cuts, Ontario was funding about7,450 new social housing units annually, ac-cording to Where’s Home?, a comprehensivesurvey of rental housing in Ontario. The cu-mulative loss of these units, from 1996 to2003, is 59,600 co-op and non-profit homes.

In addition, the province announced in1995 that it would cut about 3,000 rent-geared-to-income units in social housingprojects and in the following three years cutan estimated 3,300 rent supplement units inprivate rental housing.

Total social housing losses in Ontario since1995: 82,900 homes (enough housing for224,000 women, men and children).

The main reason for the big losses was thedecision to cancel government-funded social

housing programs and download the cost andadministration of existing programs to cash-strapped municipalities. But the local prop-erty tax can barely support existing commit-ments, let along provide funding for much-needed new social housing.

Minister Leach denounced social housingas an expensive “boondoggle” through mis-leading and inflated claims. A number of On-tario-funded social housing projects weredeveloped in the late 1980s and early 1990swhen land and other development costs werehigh. During this time, several large privatereal estate companies collapsed under the bur-den of a crippling real estate market. How-ever, co-op and non-profit housing providerscontinued to pay their mortgages, propertytaxes and other bills. And, as noted in the1999-00 Ontario Public Accounts: “To date,there have been no claims for defaults on in-sured mortgage loans” by social housing pro-viders.

As mortgage rates dropped in the 1990s,and financing costs decreased, the investmentin social housing by previous governmentsproved to be a sensible and cost-effective de-cision, both for residents and for taxpayers.

Private rental losses: 44,780 units

Canada Mortgage and Housing Corporation’sannual rental survey is considered the bestindicator of the health of the rental housingmarket. In 1994 (the year before the Con-servatives were elected), Ontario had 652,917units in its “rental universe.” By 2002, thisuniverse had shrunk to 611,353, a loss of41,564 units.

But CMHC’s “universe” only counts con-ventional rental housing (buildings with threeor more units). The 2001 Census from Sta-



tistics Canada reported that there were moreunits in the secondary market than inCMHC’s conventional rental survey. Therenters in this non-conventional market livein basement apartments, rented condomini-ums and accessory units. Many units are ille-gal and substandard under municipal or pro-vincial regulations. Tenants often have nolong-term security and few protections frompredatory practices by landlords.

Ontario claims that the secondary marketacts like a safety valve. As vacancy rates in theconventional market drop to dangerously lowlevels, desperate tenants can find relief in thesecondary market. To test this theory, the On-tario Ministry of Municipal Affairs and Hous-ing and CMHC commissioned The StarrGroup, a private consultant. Its report, issuedin 2000, confirmed that secondary rental unitsprovide a home to a majority of renters – morethan 70% in the Greater Toronto Area and55% in Sudbury, for instance. But their ma-jor conclusion offered no relief to tenants:

“Because of lack of expansion of thesemarkets, vacancy rates for such formsof housing are quite low in most cen-tres. Rents for most forms of secondaryrental housing have been rising sharplyin most areas, consistent with low va-cancy rates in both secondary and con-ventional markets.”

To add to the bad news, the secondary mar-ket is shrinking along with the conventionalmarket. The 2001 Census reported 1,351,365private rented units in Ontario. The 1996Census put the total at 1,396,145.

Total private rental losses in Ontario from1996 to 2001: 44,780 units (enough housingfor 121,000 women, men and children).

One major reason for the big loss: Ontariocancelled the Rental Housing Protection Act in1998. This law allowed municipalities to regu-late the demolition and conversion of privaterental housing. With legislative controls gone,demolitions and conversions outpaced newconstruction. Previously affordable rentalhousing was lost, and homelessness increased.

Vacancy rates

Canada Mortgage and Housing Corporationreleased its latest annual rental market surveyin November, 2002. The vacancy rate meas-ures the number of vacant units in the con-ventional market. A rental vacancy rate above3% is considered healthy, while rates below3% are in the danger zone.

The latest CMHC numbers show a smallincrease in the rental vacancy rate in Ontario,and in about half the regions in the province.Provincial officials leaped on the new num-bers as “proof” their rental policies were fi-nally working. But the CMHC numbers tella different story:

• The overall provincial vacancy rate is stillin the danger zone at 2.7%. More thanthree-quarters of the province, includingmost of the biggest cities (Toronto, Ottawa,Hamilton, London), have vacancy ratesbelow 3%.

• About half the regions saw rental vacancyrates drop in 2002 from 2001, a clear warn-ing sign. And CMHC analysts say that therates in other communities will likely fallin 2003.

• In a number of centres, such as Toronto(home to almost half the conventional


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rental units in the province), vacancies wereclustered at the upper end of the rent scale.The majority of tenants cannot afford theserents.

Higher vacancies are not translating intomore moderate rents. The community withthe highest rental vacancy rate in Ontario in2002 – Kapuskasing – also had the biggestrent increase. Everywhere across the province,rents are increasing – usually faster than therate of inflation – even though vacancy ratesare easing in some areas. The one exception,Barrie, saw a decrease in average rents of lessthan one percent. Yet, Barrie has a very lowrental vacancy rate.

Private market theorists argue that increas-ing rental vacancy rates will lead to lower rentsas landlords “compete” for tenants. The realmarket in Ontario delivered the opposite.

There are reports that some landlords inToronto are using incentives to attract ten-ants to high-rent units. But this doesn’t helplow, moderate or even middle-income renters.The benefits only go to wealthy renters.

Guarantee denied:No subsidies for tenants

A key promise in the Common Sense Revolu-tion, and “guaranteed” by Minister Leach, wasshelter subsidies for “all Ontarians who needhelp in affording a decent level of shelter.”While the government quickly delivered onits promises to investors and developers, itfailed on the one promise that it made to ten-ants. The province has never explained whyit has shelved this oft-repeated promise.

One reason may be that shelter subsidiesare very expensive. The subsidies cover the dif-

ference between the amount a low-incomehousehold can afford to pay (usually calcu-lated at 30% of household income) and theactual rent. Since private rents usually increaseevery year, rent subsidies are guaranteed to costmore every year. The costs were compoundedwhen the government eased rent regulationlaws.

The province never released its own esti-mate of the cost of a comprehensive sheltersubsidy program, but a plan that would helpthe 885,000 renter households with incomesless than $23,000 (the median renter house-hold income in 1999) could cost as much as$361 million monthly (using the 2002 aver-age rent of $836). That’s more than $4.3 bil-lion annually.

Rent subsidies have an inflationary impacton the overall rental market, according to re-search by New York University researcherScott Susin published in the Journal of PublicEconomics in 2002. Says Susin:

The main finding of this study is thatthe voucher program has already causeda large increase in the price of housingfor the poor in the 90 metropolitan ar-eas examined here. The most robust es-timate presented here suggests that thevoucher program has raised the rent paidby unsubsidized poor households in theaverage metropolitan area by 16 percent.. . . An upward sloping supply curve alsohas the familiar implication that vouch-ers are not simply a transfer to those whoreceive them, but also to landlords. Con-sidered as a transfer program, the esti-mated 16 percent increase in rent im-plies that vouchers have caused an $8.2billion increase in the total rent paid bylow-income non-recipients, while only



providing a subsidy of $5.8 billion torecipients, resulting in a net loss of $2.4billion to low-income households.

His conclusion: “construction subsidiesmay do more to improve the housing condi-tions of the poor than do demand side subsi-dies like vouchers.”

Housing advocates, noting that most low-income households live in private rental hous-ing, agree that rent supplements (a form ofrent subsidy in which the landlord signs acontract and agrees to keep the rents afford-able and to properly maintain the property)are a necessary part of an overall housing strat-egy.

People on welfare – among the pooresthouseholds in Ontario – not only didn’t getthe rent subsidies promised by the govern-ment, but they had the shelter allowance por-tion of their welfare cheque cut by almost 22%in 1995. Not one penny has been added sincethen, even though rents have increased anaverage of 26% from 1995 to 2002. Currently,there are 188,824 households receiving On-tario Works, which includes more than389,000 women, men and children. Morethan 80% of them live in private rental hous-ing.

In 1999, the Ontario government signedthe Social Housing Transfer Agreement withthe federal government. Under this deal, theprovince agreed to administer almost all fed-erally-funded social housing units in the prov-ince (except for federally-funded co-ops,which won a political campaign to be excludedfrom the download). In return, the federalgovernment agreed to give Ontario hundredsof millions of dollars annually, including sur-plus funds that became known as the “sign-ing bonus.”

The province announced on November 19,1999, that it was using part of these surplusfederal dollars to fund 10,000 new rent sup-plement units. At first, all the money was sup-posed to go to private rental units, but pri-vate landlords balked at the rent caps (whichlimited the rent that could be charged to avoidhaving the funds drained as rents rose thanksto lax rent regulation laws).

Those same rent supplement units, fundedwith the federal dollars, were re-announcedby the province at least four more times (Janu-ary 14, 2000; November 2, 2000; May 2,2002; August 20, 2002) as the governmenttried to get landlords on board. There are stillat least 1,000 to 2,000 units that haven’t beenallocated. These units are expected to be an-nounced yet again in the Ontario budget inMarch, 2003.

If the 8,000 or so rent supplement unitsalready allocated are set against the 6,300 rentsubsidies that were cancelled, the overall in-crease is less than 2,000 rent subsidies – farshort of the comprehensive program originallypromised. Once the cuts in shelter allowancesfor welfare recipients are factored in, the gov-ernment took away far more rent subsidiesthan it ever delivered.

More rent: Same old housing

By the year 2001, fully 60% of Ontario’s rentalhousing stock was more than 30 years old. Ashousing ages, major systems begin to fail un-less they are properly maintained. The oldestrental buildings – those built in 1945 or be-fore – have the highest need for repairs. Over-all, almost one-third of the province’s rentalhousing needs either minor or major repairs.Housing advocates have warned for years thataging and crumbling private rental housing


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will become a costly issue, not just for ten-ants and landlords but also for governmentsand taxpayers.

The Ontario government hoped that land-lords would voluntarily use at least part of themassive rent increases generated as rent regu-lation laws were relaxed in 1998 to repair pri-vate rental stock.

The 1996 Census found that 65% of On-tario’s 1,396,145 rental units were in reason-able condition, needing only regular upkeep.Approximately 345,000 units (25% of over-all units) required minor repairs and 147,000(10% of overall units) needed major repairs.Five years later, the 2001 Census reported that64% of Ontario’s 1,351,360 rental units re-quired only regular maintenance. Approxi-mately 343,000 units (25%) needed minorrepairs and 141,000 units (11%) requiredmajor repairs.

By 2001, Ontario was already three yearsinto the new rent regime. Rents were risingto their “natural levels” in order to allow land-lords to invest in new rental housing and fixup their existing stock. However, not only wasthere a loss in the number of rental units, butthere was no change in the percentage of unitsthat needed major or minor repairs.

Ontario cuts housing spending

Ontario led all the provinces and territoriesin the dollar amount of housing cuts in thelate 1990s, according to a survey by CanadaMortgage and Housing Corporation in 2001.Ontario cut $303.8 million in housing spend-ing between 1993-94 and 1999-00 – fullyone-quarter of its overall housing budget.

The Expenditure Estimates from the Man-agement Board, pick up the story from there.The Housing Market Program of the Minis-

try of Municipal Affairs and Housing fundssocial and market housing, including subsi-dies for existing social housing and adminis-tration of tenant protection. The annualspending numbers:

• 1999-00 – total spending of$1,147,389,240, minus a federal socialhousing transfer of $358 million, for netprovincial housing spending of $789.4million



• 2002-03 – total spending of$738,056,400, minus a federal social hous-ing transfer of $524 million, for net pro-vincial housing spending of $214.1 mil-lion

Since 1995, the government has cut $879.1million from provincial housing programs.

Private sector: More demands, noaffordable units

As the province-wide housing crisis and home-lessness disaster has grown worse in recentyears, provincial officials once again moved



behind closed doors with private sector inter-ests to come up with a plan.

The Housing Supply Working Group has23 members appointed by the province, andit meets in private. Eight members are fromthe Fair Rental Policy Organization, threefrom the Greater Toronto Home Builders’ As-sociation, two from the Ontario Home Build-ers’ Association and three from the Urban De-velopment Institute. Sixteen of 23 membersof the working group are from the same or-ganizations that met secretly with MinisterLeach in 1995, so it’s no surprise that theyhave the same demands: More subsidies andtax cuts for private interests. And they are stillnot making any specific commitments to ac-tually build new affordable homes.

The Housing Supply Working Group is-sued its second report, called Creating a Posi-tive Climate for Rental Housing DevelopmentThrough Tax and Mortgage Insurance Reforms,in November of 2002. The lobbyists have lostnone of their zeal for changes that favour pri-vate rental interests. They are also anxious notto lose anything that they have won over thepast eight years. And the working group in-sists that the small amount of new federalfunding for affordable housing shouldn’t onlybe spent on affordable units. They say thateven expensive condominiums should getpublic subsidies. They say:

“The Working Group’s view is that theability to convert rental units to owner-ship is an important feature of the cur-rent regulatory environment and shouldbe maintained. We welcome the re-sponse to our earlier recommendationsregarding PST offset grants. Providingsuch grants to units in the new Afford-able Housing Program is a good step,

however, we also would continue to urgethe government to provide sufficientfunding so that the grant can be madeavailable to all new rental units. As well,we continue to believe that the rebateshould apply to purpose-built rentalunits that are condominium registered,that consideration should be given toeliminating the PST on mortgage insur-ance for home owners and that similarconsideration be given to extending theoffset grant to building materials usedin the construction of affordable own-ership homes.”

The faith in private markets to solve theprovince’s affordable housing crisis is undi-minished despite eight years of failure. Justlike in 1995, the latest working group won’tpromise to actually build any new affordablehousing in exchange for the rich benefits thatthey are seeking. Low-income tenants desper-ate for new affordable supply will have to con-tinue to be patient and wait for vacancies totrickle down. The final paragraph of the lat-est report says:

“Currently, builders appear to be inter-ested again in entering the market, es-pecially at the luxury end, which offershigher income streams and potentiallyhigher rates of return. As mentionedearlier, high-end rental production mayhelp to create market liquidity and newopportunities for loosening the pressureon available stock. New high-end rentalattracts higher income tenants, therebyfreeing up some existing lower pricedstock for tenants. However, an ongoingobjective of governments must be toencourage developers to build for mid-


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range rental markets – and this has beena recurring theme in Working Groupdiscussions. We believe the implemen-tation of the measures reviewed in thisreport will be a major step to achievingthis goal.”

Private programs:Big spending, little regulation

The federal and Ontario governments havetried a number of private sector housing pro-grams since the late 1940s. The pattern is clear.The big expensive programs produced expen-sive private rental units, but have been un-able to deliver affordable rental housing. Pri-vate sector programs are the least regulatedhousing programs, produce the fewest ben-efits to low-income households and have al-most no accountability to taxpayers.

A brief history:Limited Dividend Program (1946 to

1975) created 101,300 units that were, ini-tially, moderately priced. But, over time, rentswere allowed to rise beyond those affordableto low-income tenant households.

Multiple Unit Residential Building –MURB (1974 to 1981) created 195,000 unitsat an estimated cost to taxpayers of $2.4 bil-lion. There were no rent restrictions, so rentstended to be at the upper end of the market.

Assisted Rental Program (1975) created122,650 private rental units at a cost of $300million. The federal government providedgrants or loans to private landlords with norestrictions or requirements on rents. An earlystudy showed that in Toronto, average ARPrents were 32% higher than average marketrents.

Canada Rental Supply Plan (1981) costtaxpayers $258.5 million (including the sub-

sequent Canada/Ontario Rental Supply Pro-gram). Under this program, one-third of theunits were supposed to be set aside for low-income households. Of the 24,667 unitsfunded across Canada, only 1,526 (6.2%)were affordable. For CORSP, 2,675 units werefunded, but only 474 units (18%) were af-fordable.

Ontario Rental Construction Loans pro-gram (Ontario, 1981) cost taxpayers $75 mil-lion for 15-year interest free loans to privatelandlords with no restrictions on rents. Land-lords were supposed to offer up to 20% ofunits to local housing authorities for RGI. Ofthe total of 14,540 units produced, with only1,029 (7.3%) were affordable.

Convert-to-rent (Ontario, 1983), pro-duced 11,900 units with a range of rents, allwell above market rents and not affordable tolow-income households.

Renterprise (Ontario, 1985) cost a mod-est $15.4 million and had the goal of build-ing 5,000 new private rental units. Target mar-ket rents were established and many develop-ers withdrew in favour of condominiums.Only 2,176 units were built.

A 1997 study funded by Canada Mortgageand Housing Corporation compared the long-term costs and benefits of private sector andsocial housing projects. It found that the costof subsidizing co-op and non-profit projectswas far less than subsidizing private investors,developers and landlords. The study reportedthat in year 25 alone, social housing projectscost taxpayers $800,000 less than the privateprojects:

“In all ten comparisons, the non-profitbreak-even rents started out higher thanprivate rents but then rose more slowlythan market rents. In nine of the ten



cases, the non-profit rents crossed be-low market between the fourth andeighteenth year of operation. Assessingthe resulting subsidy costs for compara-ble households (based on the use of aconsistent 30 percent RGI scale), thestudy found that, over the past two dec-ades, the non-profit vehicle has been themost effective vehicle in nine of the tencases. On average, over time it is lessexpensive to subsidize households innon-profit projects. For example, in year25 the estimated average subsidy of anon-profit unit compared to the esti-mated subsidy for a market unit is some$20,000 a year less. . . Since the tenprojects have a total of some 400 units,the total savings in year 25 for theseprojects alone would be some $800,000.. . Non-profit projects can be more costeffective than subsidizing the construc-tion of comparable market units andrenting units from a private landlord.”

Ontario’s not-so-affordablehousing program

In November of 2001, Ontario joined withevery other province and territory in signingthe Affordable Housing Framework Agree-ment with the federal government. This dealstates: “In light of declining vacancy rates andlow production of rental housing, federal,provincial and territorial governments believethere is an urgent requirement for short-termmeasures to increase the availability of afford-able housing across Canada,” adding: “Thisinitiative needs to create affordable housingfor low to moderate income households.”

The provinces and territories were sup-posed to design and deliver the programs.Each province and territory was required tonegotiate a bilateral deal with the federal gov-ernment spelling out the details of the newAffordable Housing Program in their juris-diction. The federal government committed$680 million over five years. The provincesand territories agreed to match this money,with a big loophole:

“Provinces and Territories will be re-quired to match Federal contributionsoverall. Provincial and territorial contri-butions may be capital or non-capitalin nature, and may be in cash or in kind.These contributions may be made by theProvince or Territory or by a third party.”

Ontario signed a bilateral housing dealwith the federal government in May, 2002,taking maximum advantage of the loopholes.While the federal government will spend $245million over five years to Ontario, the prov-ince is only promising $20 million. More than$180 million of the so-called provincial sharewill come from municipalities.

Ontario downloaded most of the cost tomunicipalities and also gave them the respon-sibility for administering it. However, theprovince kept control of key details. Heavy-handed actions by Ontario, even though it isonly paying a tiny share of overall costs, an-gered a number of municipalities and delayedthe roll-out of the plan.

The province finally announced details inDecember, 2002, but it still has to negotiateseparate agreements with every municipalitythat wants to get the federal cash. In Marchof 2003, seventeen months after Ontario


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signed the framework agreement, not one unitof new affordable housing has been built. Andno units are expected for months to come.

In addition to delays and almost no pro-vincial funding, Ontario has written the rulesto ensure that little of the new housing willbe affordable for low and moderate-incomehouseholds – the ones who were supposed tobenefit. Ontario has defined affordable asunits “priced at or below average market hous-ing rents.” Average market rents are muchhigher than the amount that most householdscan afford to pay.

The province’s 295,000 poorest households(800,000 women, men and children) haveincomes of $11,201 or less, according to Sta-tistics Canada. They can only afford rents ofup to $280 per month. The next 295,000poorest renter households are only slightlybetter off. They have annual incomes of$17,000 or less and can afford rents of up to$424. The CMHC average rent for Ontariowas $836 in 2002 – that’s three times higherthan the amount that the poorest renterhouseholds can actually afford, and almostdouble the amount that moderate-incomerenter households can afford.

The province has decided that one key fac-tor in selecting eligible projects is the level ofsubsidy required per unit: The smaller the sub-sidy, the greater the chance of receiving agrant. Spreading a small amount of moneyover a large number of units is a smart politi-cal ploy for a government that wants to boastabout a large number of units being funded.But a tiny subsidy per unit means that therents per unit will be higher, and less afford-able, than if the per-unit subsidy was morereasonable. Once again, the province is tell-ing low and moderate-income renter house-

holds to wait as the latest set of public subsi-dies are directed to higher-rent units.

The National Housing and HomelessnessNetwork and others welcomed the AffordableHousing Framework Agreement as a first steptowards a fully-funded national housing strat-egy. The 2003 federal budget added another$320 million over five years to the AffordableHousing Program, another welcome step atthe national level.

The Ontario share of the new 2003 fed-eral money could be as much as $115 millionover the next five years, but only if Ontarioproduces matching funds. And, like the $245million assigned to Ontario under the origi-nal framework agreement, the new moneywon’t reach the households that need the helpthe most unless the province changes the rulesthat it announced in December of 2001.

Many national groups are calling for thefederal government to commit $2 billion an-nually for new social housing as part of a na-tional project called the One Percent Solu-tion. In the last two years, the federal govern-ment has upped its commitment to an aver-age of $200 million annually – ten percent ofthe way towards this goal.

But Ontario, which consistently cuts itshousing spending and refuses to even matchthe new federal dollars, is falling farther be-hind.

OAB plan for new housing

The Ontario government’s housing policieshave almost eliminated the province’s afford-able housing programs in the hope that theprivate market would step in and fund newaffordable housing. Not only has Ontario losttens of thousands of rental units, but rising

rents and stagnant renter household incomeshave meant that the rental housing crisis hasgrown worse in the past eight years.

Private interests have not charged to therescue, even as they cashed in on the manylucrative changes they demanded from theprovincial government. Of course, the lobby-ists never actually said that they would buildany new affordable units. And private inves-tors, developers and landlords still won’tpromise to build a single new truly affordableunit even as they ask for more generous sub-sidies from government.

There is a real alternative: A substantialpublic investment in new affordable socialhousing based on a administratively-efficientand fully-accountable program of capitalgrants coupled with rent supplements for lowand moderate-income households in both ex-isting and newly-built units.

This investment plan, along with a returnto effective tenant protection laws (real rentregulation and strong laws to protect existingrental housing from demolition and conver-sion), would reverse the trend of the past eightyears and start to ease the province-wide hous-ing crisis and homelessness disaster.

The Ontario Alternative Budget for 2003has a housing plan that would generate 15,000new social housing units annually, plus rentsupplements for 40,000 low and moderate-income renter households annually.

The cost of these initiatives:

• $630 million annually for 12,600 new pro-vincially-funded affordable units,

• $72 million annually for 2,400 new unitsas Ontario’s share of the federal-provincialAffordable Housing Program, and

• $196 million annually for 40,000 new rentsupplement units.

Over five years, this sustained investmentwill generate 75,000 new affordable rentalunits and rent supplements for 200,000 lowand moderate-income households.

The full Ontario Alternative Budget, to bereleased in late March of 2003, will have de-tails of the housing plan within the contextof a fiscally responsible provincial budget.

Notes on data sources:

Where’s Home? is available on the HousingAgain Web site at www.housingagain.web.net.Follow the links from the main page. Clickon Resources to access an extensive on-linelibrary of housing research.

Information on financial contributions topolitical parties is available from ElectionsOntario. Click on www.electionsontario.on.caand follow the links to election finances.

Canada Mortgage and Housing Corporation’sannual rental market survey is on their Website at www.chmc-schl.gc.ca. Go to News-room. The survey is released in Novemberannually. CMHC also has extensive housingdata for sale.

Statistics Canada data, including the 1996 and2001 Censuses, is available on their Web siteat www.statcan.ca. The home page has a di-rect link to Census data.

Information on provincial government fi-nances is published in the Public Accounts,posted at http://www.gov.on.ca/FIN/english/engpaccts.htm. Spending is reported in the




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provincial Expenditure Estimates from theManagement Board at http://www.gov.on.ca/MBS/english/mbs/estimates/index.html.

Previous technical reports on housing in On-tario are available on the Canadian Centre forPolicy Alternatives Web site atwww.policyalternatives.ca. Click on Provin-cial Offices, then CCPA – Ontario. Then clickon Research & Publications.

About the author:

Michael Shapcott is Co-ordinator of the Com-munity-University Research Partnerships Unitat the Centre for Urban and CommunityStudies at the University of Toronto. He is amember of the Ontario Alternative BudgetWorking Group and a long-time housing andhomelessness advocate. E-mail address:[email protected].

Canadian Centre for Policy Alternatives410-75 Albert Street, Ottawa, ON K1P 5E7

tel: 613-563-1341 fax: 613-233-1458email: [email protected]://www.policyalternatives.ca

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