Sunday, October 16, 2016

THE AFFORDABLE HOUSING CRISIS RECONSTRUCTED

We are hearing from more and more news reports that certain cities that young, upwardly mobile professionals are increasingly getting locked out of the housing market, without help from parents or winning a lottery of sorts.  This is particularly true of Vancouver and Toronto..  We are learning that political authorities have been trying various measures to "cool" the hot housing markets where there is this difficulty, such as imposing a tax on foreign investors or a vacancy tax.  Younger people are still buying, but further afield from their workplaces, thus amounting to a longer commute for them to go to work each day (and thus contributing to the congestion problem).

At the other end of the market, we are talking to people who have purchased homes perhaps in the last few years, but can no longer afford to stay in them.  This is particularly true of seniors, as pensions are diminishing and forcing more and more elders into poverty, or due to health issues that such seniors cannot afford to cover the costs for (e.g. home care, accessibility renovations).  Low income persons in their own homes are also impacted by higher costs and stagnant benefits.  With the removal of the Home Repair Benefit that used to assist at least on ODSP to perform necessary repairs in their home has been cut, leaving only loans and discretionary programs that rely on geography and even then, on the whims of the region or county one lives in.  There has been a substantial hike in the number of low income persons, including assistance recipients and seniors, who cannot afford to repair leaky roofs, heating systems, electrical system, etc.  In my own practice, I've represented such persons who were essentially threatened with an unsafe building order when it was learned that these people were living in such states of disrepair.  Unfortunately, my region thinks the only solution is for these folks to live in shelters, where their health will decline quickly.

At the very lower end of the spectrum, people are only seeking rental housing at a reasonable cost.  For those on social assistance, there is nowhere in Ontario they can live and stay within their allotted shelter allowance without having to take the majority of their "basic needs" benefit to cover their shelter costs.  Average rents across Canada and Ontario have been rising, not falling.  Yet social assistance rates have been falling further and further behind the costs of everyday items.  The only other options for such folks is to get on the wait list for social housing, which hardly seems worth it as lists are very long and there is little turnover in available units within the respective municipalities. Even if we can manage to build 171,360 units overnight, the wait list will be refilled by others who see movement on this eternal wait list and want to join up too.  The cost of building all the new units we need would be way too expensive - in the multi-billions! However, the wait lists are not getting shorter, nor is the wait times getting reduced.  Even people with so-called "priority listing" can wait at least a couple of years before they get a unit.  Others can wait between six years in some regions to twenty-one years in others.  It is obvious the social housing system we have adopted is not working.

Even when people do obtain a unit, the municipally owned ones are often in a state of disrepair.  In my opinion, the municipalities do not have the money to keep them up.  The larger their owned housing stock, the worse the problem appears to be.  In Toronto, TCHC units have a $2.6 billion repair backlog, while Niagara Region (a smaller region with a lower proportional housing stock) has a $120 million backlog.  In its report, entitled Neighbourhoods First, the Smarter Niagara Steering Committee has presented a number of problems with social housing itself, particularly how those in social housing are segregated and are made to know their place in society (as being less valued and sought after).  Their suggestions have been interesting, to say the least:

1.  The Cost:

In this report, it stated  What is not measured is the public tax benefit (much less the human benefit) of diverting children to better outcomes compared to the cost of providing subsidized housing to subsequent generations. This approach to addressing housing affordability costs all of us in lost productivity, continued social assistance, and in the physical upkeep of the properties. Much of the current affordable housing stock is in disrepair, largely due to the failure to adequately invest sufficient initial capital funds. Many buildings were cheaply built with low “maximum unit prices” and other methods of capital cost limitations. Insufficient reserve funding also meant that these projects suffer from budgetary deficits and are now forced to refinance for capital improvements well beyond what private market units would require.  Children who have grown up in public housing often end up living in public housing themselves as they grow up.  People in one part of my husband's family have all lived in public housing as children, only to grow up and have children living in public housing themselves.

Repair backlogs are expensive.  I've been inside units in my region that have had serious issues, such as mould, rotting ceilings and nonworking appliances.  When taken to task for repair issues, the municipality cries about lack of budget, whereas we can force private landlords to fix their     properties relatively easily comparatively.

2.   Segregation:

Particular buildings and housing complexes are known as "public housing" and act as ways to   segregate low income people.  When people living in these communities go outside, they do not see a diversity of people, with a diversity of lifestyles and different levels of ambition.  They mostly meet people much like themselves who could only teach one another how to better "survive" poverty.

3.   Social Housing Rules:

The rules determining rent rate depend on what a family's total income is, as well as number of people.  If there is a mismatch between the number of people and the unit size, the family may be forced to move.  If a family with several children live in a social housing unit, as each child leaves the household, the family may be forced to move once again (at their own expense and trouble).  This repeats itself until the person is living alone or half of a couple, whereas then they are not permitted except under slim circumstances to have a second bedroom, where many families outside the subsidized system use the spare bedroom as a place for a child to return home to, to house a family member in temporary need of a place to stay, or even to start a home based business.  In social housing, none of this permitted, even having a home business run out of one's unit (although this might have changed recently although one is still likely not allowed to allocate an extra bedroom to run the said business).  In addition to this, those receiving OW or ODSP are further punished if they attempt to earn significant incomes or try to reduce their reliance on social assistance. It is stated in a study by the Social Housing Services Corporation that a full time worker living in an RGI unit gains a net of only $1 per hour for working full time, as opposed to remaining on social assistance and not working at all.  Further, as individuals work more hours, their housing rents go up accordingly, eventually trapping the person into making very difficult choices: quit the job/reduce one's hours or move to market housing.

4.    Maintaining Families as Permanent Renters:

If you are paying only $139 a month for rent and you go to a bank or mortgage broker seeking a mortgage to buy even a low priced ownership property, you will be laughed out of there.  Somebody paying full market rent for several years without issue has a greater chance of being accepted for a mortgage than somebody that hasn't.  There are some assisted down payment programs available through social housing providers, but they are limited in scope.  Even seniors that own their own homes have to sell within six months of being accepted into social housing, which means they cannot maintain an asset that might do them well as they move on in years and might need additional income or leverage for borrowing, or even to pass down to their children in an inheritance.  This makes poverty further inherited and embedded into the family structure.  In the market, technically home ownership and renting should be competitive and if rents are set too high, tenants should theoretically have the option to move to ownership.  It doesn't work that way, so of course, the rental market is more likely to be difficult for lower earners.  Saving for a downpayment is that much harder for them.

5.    Little Assistance for Low Income Homeowners:

Imagine you became sick and had to leave your job and had to resort to disability benefits.  You own your home, can manage (barely) the monthly costs of ownership, but cannot afford the extras, such as when your roof blows off or your furnace quits in the middle of January.  There are way too many homeowners in this position.  Some of them can afford to take on more debt, by applying a home equity loan to the cost of their repairs, but this would increase the monthly cost burden to those whose income is too low to take that on.  Further, some homeowners end up with something major happening, whereas the insurance refuses to cover it or only covers a portion of the repairs.  There used to be the RRAP (Residential Rehabilitation Assistance Program) run through the federal government and there were provincial counterparts, as well as the Home Repair Benefit for people receiving social assistance.  Virtually all of those programs were scrapped in favour of a municipally-run discretionary forgivable loan (for my region the maximum one can acquire is $5,000 for every 10-year period which is truly inadequate).  There were tax credits, but they were not refundable meaning people have the money to do the repair, spend it and then later can "write it off".  Those people without income to begin with are sharply disadvantaged.  Repair costs can add up rapidly and quiickly exceed the $5,000 maximum, as I've seen in many cases.  Most of these people live in their homes without adequate heat, hot water or other issues, hoping beyond all hope nobody finds out.

In most cases, homeowners do not want to return to the rental market, especially under the current rules in place, which effectively keep them impoverished and cause them to drain all or most of their assets just to receive an inadequate amount of support.  Perhaps, if this help was more realistic and made more readily available to low income homeowners, there would not be the downturn of assets and impoverishment the current rules force on people.

6.    Stigmatization:

Lastly, there is a great deal of stigma with certain addresses or housing run by certain groups (e.g. housing for people with mental health problems).  Most people who have mental health problems do not want to live in a "mental health" housing unit, as this usually denotes the requirement that they need twenty-four hour support or at least daily support.  People may need this support, but it should not be connected to their housing unit and the person should be able to stay there if their needs change later on.

Recommendations include:

1.  Change the RGI income rules so that the same dollar is not clawed back twice or more if the     resident is on social assistance.  The Marginal Effective Tax Rates are very high for this group,       ranging from 85% to sometimes exceeding 100%.    While we have billionaires complaining that if they have to pay a single dollar more than the 15% rate they currently pay, they say they have no incentive to hire or to invest ... why is it any different for poor people?

2.  Be easy on the rules about over-housing/under-housing.  If somebody has a reasonable need for a second bedroom, allow it.  If I had to move to a one-bedroom at the time I was literally being   harassed to do so back in the 1980's, I would have had to quit school not having a quiet place of my own to study.  People's needs differ and the "one size fits all" mentality has to stop.  For others with larger families, they may wish to move to a smaller unit to get in to social housing and out of overpriced rental housing just so they can have a place to stay until an appropriate sized unit is available to them.

3. Quit segregating the poor into specific buildings or projects.  Tie the subsidy to the person or        family, not the unit.  Let people move where they want and give them a portable subsidy to top up their income so they can reasonably afford average market rent accommodations for their needs.  This way, people should have the right to move if the need arises.  People in segregated complexes are often left to live with less than desirable neighbours, one of whom was beaten up by his neighbour for being a Muslim and told to move back to "his country" though he was born and raised here.  He asked for a transfer, but was refused.  If one's neighbours are up all night partying and dealing drugs to others in the complex, one should also have the right to move, esp. if the housing complex refuses to evict them (which is often the case as they refer to themselves as "last resort housing providers").

4. Work on the economy from the bottom up.  Never mind tax breaks for those that can afford to   pay them and get rid of those boutique tax breaks that most low income people will not be able to use anyways, such as children's sports credit, children's art credit, etc. (and myriad of other credits available to families that can easily pay the costs to these things, only to have a tax break for part of the purchase).  These taxes if paid would go a long ways to assisting those at the bottom, many of whom will be able to spend the extra money and grow the economy.

5. Recognize housing affordability at the lower end is an income problem and not a housing       problem.  At the present time, landlords cannot afford to drop their rents so that lower income     people can afford them.  However, there would be less issue with maintaining and developing new rental properties if more people can afford to rent them.  Some of the proposals regarding a portable rent subsidy in Michael Mendelson's paper are worth looking at, particularly those that would allow all low income people on assistance to afford average market rents.  This should also be available for homeowners that are paying too much of their income on basic monthly costs for their homes as well. Supply will eventually develop as more landlords see the potential to rent to more people in the market.

6. For those in |"supportive housing", there should be a disconnection between the support and the     unit.  Therefore, the support would come to the person on an as needed basis, while it would be reduced over time as the person needs less help, but can still remain in the same unit.

7. There should also be innovative funds for people wishing to enter the market for renting units to others.  For example, a homeowner of a single family home may want some assistance to purchase a tri-plex or four-plex and renovate them to enable them to provide affordable rents to those seeking rental housing in their communities.  Doing this should be encouraged, even if the homeowner is on ODSP or other social assistance and can rent the units to recover some additional income over and above the maintenance costs.  Some people on ODSP do want to retire with some assets and not have to rely on GIS.

8.  Also, municipalities should be allowed to buy and sell their housing stock to anybody, or even sell their stock and remain only in the business of managing the housing supports.  Given this additional freedom, this will reduce the repair backlog and also enable some social housing tenants to purchase their own units, either on their own or collectively.

These are my thoughts.  What about yours?