The significance of the end of federal investment in social housing through the expiry of operating agreements has not gone unnoticed. If low-income households currently living in social housing will continue to have affordable, safe housing when operating agreements end has been discussed by housing providers, the media and in Parliament. Given the complexity and incremental nature of this issue, however, misconceptions abound. Here are the central misconceptions that we’ve heard, and the real facts:
Fact: Social housing providers with targeted programs receive federal funding to cover their mortgage costs AND to account for the difference between the rental income they received and their operating costs. This is what made it possible to house low-income tenants.
Fact: Social housing was developed under various programs, which had different requirements and funding structures. There were three main types of programs:
Fact: Social housing was structured in such a way that the mortgage matures when the operating agreement ends, but that’s not where the story ends:
For targeted providers, because they receive funding which accounted for the difference between their rental revenue and operating costs, in addition to mortgage payments, they will face a considerable deficit without ongoing funding. They were set up to fail in the absence of continued federal funding for subsidies. They will have no choice other than to increase rents or sell some homes in order keep others for low-income households, leaving many vulnerable families at risk of homelessness.
For non-targeted providers, many will be in a strong position when the operating agreement ends, although they may have challenges paying for needed repairs to keep their housing safe over time. Providers were limited in their ability to contribute to and maintain a capital reserve fund.
For the mixed-targeted providers, whether they can maintain the proportion of homes reserved for low-income households will depend on the capacity of the provider. Those who were internally subsidizing these homes might be able to continue to do so if they can afford other necessities, like repairs. Those who had separate Rent Supplements are less likely to be able to afford to continue to subsidize these households, since they will no longer have external funding to do so because the supplements are also attached to operating agreements which are expiring.
Fact: Stipulations in operating agreements prevented many housing providers from running their buildings in a business-like way. For example, over one-third of the social housing stock does not have a capital reserve fund, because operating agreements didn’t allow it.
Fact: The Investment in Affordable Housing (IAH) is an important source of funding, but is considerably less than what is currently provided for social housing. The IAH will contribute $1.25 billion over 5 years. Current federal funding for social housing is $1.6 billion every year, and it is declining annually. By 2016, the federal government will be saving more from its declining contribution to social housing than it is spending on the IAH.
Fact: The two programs – the IAH and social housing – don’t house the same people. The IAH stipulates that housing be rented at or below market levels. Two thirds of social housing is required to be set at geared-to-income levels for those with the lowest income.