Public Housing and the Private Sector

Last week I wrote about the Nova Scotia Affordable Housing Commission’s report, “Charting a new course for affordable housing in Nova Scotia,” sounding an alarm about its tendency to look to the private sector for solutions to the housing crisis. Days later, the federal government announced a $115.5-million, low-cost loan to Halifax developer BANC Group to build a mixed-use development with 76 “affordable” units.

Details of the investment justified every warning bell in last week’s article: BANC Group crunched the numbers and decided a $115.5 million, low-cost loan was worth keeping rents in 76 (or 4.3%) of 324 units “affordable” for 21 years. The project, which will receive federal financing through the Canada Mortgage and Housing Corporation’s Rental Construction Financing initiative (RCFi), doesn’t even employ the CMHC’s own definition of affordable, which is no more than 30% of a household’s gross income. Instead, “affordable” rents will be no more than 30% of the median household income “in the area.” And who wants to take bets on the rents remaining “affordable” when the 21-year period expires?

"The Interchange" proposed housing development, Halifax

“The Interchange.” (BANC Group)

To put this in perspective: the Canadian Centre for Policy Alternatives recently called on government to build or buy 30,000 units of affordable housing and the federal government’s response is to aid and abet the construction of 248 market-priced units and 76 temporarily affordable units.

The cherry on the cake, of course, is that Alex Halef of BANC Group was a commissioner on the NS Affordable Housing Commission. Meaning he no doubt advised government that a good way to increase the supply of affordable housing would be to give money to people like him to build non-affordable housing in return for a few “affordable” units.

And he was heard.

It reminds me of one of the few lines from Gordon Pitts’ The Codfathers that bears repeating: basically, that in the Maritimes, from a wealthy businessperson’s perspective, there’s always a government ready to pay you to do something you were planning to do anyway.

 

Non-market

Anyone still trying to pretend, in 2021, that turning to the private sector to solve social problems constitutes “innovation” should be forced to write: “I will learn my history before I write any more reports” 100 times on a blackboard.

This is particularly true of social housing, because the federal government “got out of the business” of creating new social housing in 1993. As CCPA research associate Michal Rozworski explains in this excellent 2019 article, it began with the last federal budget tabled by Brian Mulroney’s Conservative government which “ended all new federal funding for social housing construction outside of First Nations reserves,” but continued under Jean Chrétien’s Liberals, elected that same year. On their watch, the number of units of new social housing built in Canada sank from around 20,000 in 1993 to under 2,000 in 1998, as part of what Rozworski calls the shift towards “neoliberalism and near-permanent austerity.”

Outside of British Columbia and Quebec, no province has stepped up to take the federal government’s place in funding social housing. Neil Lovitt, the man behind the blog at TurnerDrake&Partners, a Halifax-based real estate broker, devoted an extra-long entry to explaining the province’s housing crisis and this is what he had to say about social or “non-market” housing in this province:

Barely more than 7% of Nova Scotia’s non-market inventory has been built since the 90s, and I would wager the proportion for more recent decades is closer [to] 0%. Over this same timeframe, all housing completions tracked by CMHC totaled nearly 98,000 units, meaning only 0.93% (910 units) of what we’ve built has gone towards increasing our non-market inventory.

So writing a report in 2021 that says the best way to fight the housing crisis is to cede a bigger role to the private sector seems…dubious?

And yet, that is essentially what the Nova Scotia Affordable Housing Commission just did and housing advocates, like CBU Professor Catherine Leviten-Reid, find that “concerning.”

 

Been there, done that

Leviten-Reid was the lead academic on another recent housing report, “Keys to a Housing Secure Future for All Nova Scotians,” from the Housing for All Working Group of the Canadian Centre for Keys to A Housing Secure Future for all Nova ScotiansPolicy Alternatives, Nova Scotia (CCPA-NS), the writing of which was informed by 48 people and organizations, including representatives from Dalhousie Legal Aid and the Canadian Federation of Students and ACORN and the Every Woman’s Centre and the YMCA and the Elizabeth Fry Society of Cape Breton. I spoke with her last week and she first told me that, to give the Affordable Housing Commission its due, it does:

…talk about the community housing sector, there’s no question about that, and they talk about building the capacity of that sector which is really important, so it’s not to say that they…totally ignored the role of non-profits and cooperatives.

That said, she found the focus on the private sector disappointing, mostly because we’ve tried partnering with the private sector to create affordable housing before — it’s been done extensively in the United States and here in Canada under Stephen Harper:

…that kind of partnership where you establish a contract so that the units are affordable for a period of years, you know, 15 or 20 years. When those contracts expire, the research from the United States really clearly shows that a for-profit provider will decide at the end of that contract to increase rents, so that the housing is no longer affordable…[E]xceptions are when that housing is in very distressed neighborhoods where there’s no demand for it from higher income renters, and so then the landlord will kind of maintain that housing at affordable rates, but those are the exceptions…

And yet, this is precisely the solution the Affordable Housing Commission proposes in recommendations like this one:

One tactic to prioritize affordable housing and cost burdens faced by developers is to offer affordable housing development land-use incentives, such as waiving of fees or reduced taxes. These incentives would be tied to a minimum number of affordable units in a development or in exchange for a development agreeing to remain as an affordable rental building for a minimum number of years, which could also avoid conversion to condominium.

Not only are these solutions not long-term, they are, if the first one out of the gate is any indication, woefully inadequate even in the short-term — 76 “affordable” units out of a planned 324? What’s that?

 

Losing what we have?

That’s one concern Leviten-Reid expressed about the Affordable Housing Commission’s report, but there’s another and it might be even more serious. While public/private partnerships are unlikely to lead to a long-term increase in our stock of social housing, they won’t actively subtract from it, either. But Leviten-Reid fears that a proposal to “Transform our public housing model” might do just that.

The problem, as I noted last week, is that the Commission doesn’t seem to understand what public housing is. Read what it considers the “issue” with our current provincial model:

Public housing, funded through all levels of government, is composed of provincially-owned, subsidized rental housing units managed by five regional Housing Authorities. Units are operated on a rent-geared-to-income (RGI) model where eligible tenants pay no more than 30% percent of their gross income for rent, or according to set rental scales for recipients of Income Assistance. Under this model, rental revenues are too low to cover operating costs, which have increased over time, and as tenant needs become more complex.

The “issue” with subsidized housing, in other words, is that it’s subsidized.

The Commission calls for a more “business-like approach focused on sustainable long-term management of assets and expansion” and for legislation to:

…provide the authority to manage and leverage housing assets to generate, retain, and reinvest revenues to optimize portfolio management. This could include decisions related to divestiture. 

“Divesture” might mean sale to a non-profit or a Community Land Trust but it might also mean sale to a for-profit developer, which would mean the loss of affordable housing units, a situation Leviten-Reid describes as “one step forward, one step back.”

She is also worried that all this discussion of “prioritizing mixed-use” developments and running public housing like a business could lead to the conversion of existing developments into “mixed-use” projects which, again, would mean the loss of affordable housing units when we need to be adding such units — and expanding eligibility to include people, like single, non-seniors, who currently find it very hard to access.

The bottom line, for Leviten-Reid, is that to solve the housing crisis, we have to think long-term and we have to turn to mission-driven non-profits and government rather than to profit-driven private developers for answers.

We’ll also, as the Housing for All Working Group report makes abundantly clear, have to be prepared to put the necessary resources into it and to get an idea of what that could look like, we’re going to Vienna…