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Council to examine subsidy program to encourage renting of secondary suites long-term

UPDATE: Committee of the Whole approved the pilot project offering grants of up to $25,000 to eight to 10 homeowners who build secondary suites in their homes for long-term, affordable rentals.

Citing high costs to retro-fit homes, councillor Phil St. Jean asked staff to seek answers as to whether the municipal pilot could be accessed as well as the the provincial program, which offers up to $50,000.

The provincial program has not been well used to date, with suggestions as to why relating to lack of marketing, or extreme high costs related to building materials, insurance, etc., that make offering the space at affordable levels prohibitive.

FEB. 8: Councillors are being asked to examine a pilot homeowner subsidy program to encourage the renting of secondary suites as long-term rentals.

The Prince Edward Lennox and Addington Social Services’ ‘Ontario Renovates – Multi-Unit Assist Program’ seeks marketing and communications support and $200,000 from the reserve for Affordable Housing to implement the pilot, with up to 10 per cent for administration of the fund by a third party, if deemed necessary.

Low rental supply and high rental prices has left many low and moderate income earners with few housing options. The Prince Edward County Affordable Housing Corporation reports that between 2020-2021, average home prices in the County increased 94.6 per cent and average market rentals hiked 61 per cent. There is also a lack of bachelor and one-bedroom long-term rentals resulting in an increased demand for two and three-bedroom rentals.

“Secondary suites (or second dwelling units) can exist in different formats,” states Ashley Stewart, Community Programs Co-ordinator, in her report to Committee of the Whole. “Most commonly, they are within the home as a secondary unit (e.g. basement apartment), or they are situated on the property of the home (e.g. garden suite, outbuilding suite). Secondary Suites are regulated through the Prince Edward County Zoning Bylaw as well as Ontario Building Code.”

She notes the suites could provide affordable rentals for tenants, additional income for homeowners and tend to have lower rental rates compared to traditional multi-unit residential properties.

General parameters of the pilot program would include providing roughly eight homeowners and small landlords up to $25,000 as a non-repayable loan to subsidize the development of a secondary suite in their home (within dwelling) or on their property (garden / outbuilding suite).

A municipally-managed program, she said, could provide more flexibility than the provincial government’s current Ontario Priorities Housing Initiative (OPHI).

In the pilot, homeowner recipients would agree to rent their secondary suite as long-term rentals at a pre-determined maximum rate and renters would not be required to fit within an income threshold, as they do with the province.

“The idea is to encourage the development of secondary suites to increase overall long-term rental housing stock while helping to stabilize rates. Ideally, additional market rent units (under the municipal pilot program) would complement additional affordable rental units (under the OPHI program).

“An alternative to creating a pilot program within the municipality is to put $200,000 toward PELASS’ OPHI program to increase their capacity to support more applications,” states Stewart. “However, due to the restrictions around the OPHI program that have been put in place by the province regarding keeping the units affordable for 15 years, a complementary program with fewer restrictions is a more beneficial approach.”

Stewart notes that while PELASS has offered the program for years, uptake has only been moderate – thus the request for assistance with municipal marketing channels.

The province’s OPHI program offers non-repayable loans to homeowners who build secondary suites in their homes as long-term rentals. The suites must be offered at a predetermined affordable rate and be available to rent for at least 15 years. The OPHI program is only available to current homeowners; landlords and developers are not eligible.

A number of municipalities and community organizations across Ontario have adopted the OPHI program and some have introduced, or in the process of introducing parallel programs with additional subsidies that generally remove some of the restrictions of the provincial program.

Stewart notes 13 municipalities within Leeds and Grenville recently approved a $312,000 parallel program with forgivable interest-free loans of up to $25,000 to “small” landlords (those who own fewer than 10 units) who build secondary suites in or on their property.

“If the property is sold within 15 years, the loan must be repaid in full. In return for the $25,000, the landlord would have to rent the new suite at an affordable rent of 20 per cent below market price…
Under OPHI, Leeds and Grenville homeowners could get a similar 20-year, $25,000 forgivable loan to build affordable suites.”

OPHI has been offered to Prince Edward County residents through Prince Edward-Lennox and Addington Social Services (PELASS) in the past, and most recently in 2019. In 2022-2023, PELASS will receive $353,790 in Provincial funding for the service area as a whole, of which 35 per cent is earmarked for Prince Edward County.

“This ratio represents a starting point for planning purposes and depending on the number of submissions received, a municipality could see additional projects supported if there was lower uptake in other regions,” adds Stewart.

The amount allocated to various streams (e.g. OPHI) is dependent on the funding requests received. Two of PELASS’ streams that support home improvements include Ontario Renovates – Home Repair and Multi-Unit Assist:

1. Ontario Renovates – Home Repair
A program that assists low to moderate income homeowners to make
accessibility and energy efficiency repairs / upgrades within their homes. This program has been run by PELASS for several years with lots of interest and uptake. $50,000 is the maximum for projects under this stream, with the exception of funding for accessibility repairs made to a home and/or unit which has a maximum of $5,000.

2. Ontario Renovates – Multi-Unit Assist
A program that assists low to moderate income homeowners by providing up to $50,000 to build new rental units within an existing family home (secondary suite) or on the property as a standalone unit (garden suite), or to repair and improve existing rental units within an existing home. Rental units must be considered affordable and must be available to tenants on a long-term basis; short-term rentals are not permitted under this program.

Under the Multi-Unit Assist program, recipients could charge up to the Canada Mortgage and Housing Corporation (CMHC) average market rent for the service manager area. The amounts vary depending on the number of bedrooms, and in 2020, the CMHC average market rent for a one-bedroom in Prince Edward County was $799 (CMHC generally updates rates annually in March for the previous year.)

Tenants would be required to have a maximum household income of $87,400 to qualify for a unit. To be eligible for the funding, OPHI regulations specify that the homeowner must rent the unit on a long-term basis, under the maximum rent threshold, and for a minimum of 15 years, otherwise the loan must be repaid in full.

Committee of the Whole meets online Thursday at 1 p.m.

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  1. Mark says:

    I agree that Queen Elizabeth would be excellent seniors housing with nice green space. This should be given to the County to assist those in need,

  2. ADJ says:

    After two years the Queen Elizabeth school is still vacant after the Countys tender was not accepted by the school board. This is because the Catholic school board had first dibs on tendering. Wasn’t there a time frame suggested to close the deal? Can the County approach the school board to re-open the tender, up their bid if necessary and pour this fund into renovations for housing of some kind? The heat is still on, services still connected and it’s a ideal location. Basically 3/4 of the work is done.

    Another suggestion would be to save the present day PECMH for the future as again it’s already built and could be turned into housing, senior accommodations, health related office space etc. Too numerous to mention. Why does every County build have to be brand new given the prices of the materials etc?

  3. SM says:

    Ms Stewart’s report indicates: “If approved, staff recommend that the subsidies offered through a pilot program come
    from the Reserve for Affordable Housing. The reserve currently contains $115,000 and staff request $200,000. The balance of the funds will be coming from developer agreements with the funds expected to be received by the end the second quarter in
    2022.” Thus, these funds would not have been used for roads.
    The parameters of the loans basically ensure that the proposed landlord will not get rich by taking advantage of the program.
    The pilot program has not been fully designed as yet. As Ms. Stewart’s report notes: “Pilot Framework Development – develop a pilot framework, with eligibility based on the criteria from the proposed Municipal Financial Relief Program, the Zoning By-law for Prince Edward County and Ontario Building Code.”
    In other words, before any money is paid out to anyone, the applicant will have to meet the criteria of the program. As this is a program designed to increase the stock of lower cost housing, it amazes me that every comment other than mine is totally negative.

  4. Janice says:

    County Rd 4 similar to County Rd 49 are absolute disgraces. These should be priorities when it comes to spending our tax dollars.

  5. Janice says:

    Can council come up with anymore ridiculous schemes to grab the taxpayers’ money! I totally agree with Dennis and Carl and Velma. Just a another cash grab for a few rich to pocket this money. Now they’ll have to hire staff to supervise and enforce this foolish scheme. Spend more money. It never ends. Just a few days ago, County work crew were filling potholes again on County Rd. 4, and today, the holes are ready to be filled again. Maybe the ice coming tonight will fill the holes!

  6. Dennis Fox says:

    I think it is safe to say that most are not convinced that this new program is really addressing the issue of homelessness or affordable housing.

    I have stated before(including letters to council) that PEC is not in the position of being able to afford funding affordable housing. Like most other communities, we will need the financial support of both the provincial and federal governments. As far as I know, Council has never made such a request to upper levels of government – they should. Like it or not, no developer nor builder can afford to build cheap houses – they don’t exists. Anyone believing that PEC taxpayer can afford this effort needs to be seriously questioned – we can’t even come close. So why this pretense by Council – politics?

  7. Fred says:

    It was not well thought out.

  8. Henri Garand says:

    There are two issues involved in council’s decision. The first is whether the municipality should in any way fund development of affordable housing or whether it should use the approval and regulatory process to compel developers to provide such housing as part of their proposed projects.

    The second issue is whether this loan program is effective. I am not personally considering any renovation that would create a rental suite, but if I were, I would not tie myself up for 15 years in order to receive a $25,000 loan while forgoing a market rate rental. I assume the loan would be secured with a property lien that would also complicate sale of my home within the 15-year term. From this viewpoint, the program is ineffective because it doesn’t incentivize homeowners sufficiently.

    But I also question the effectiveness of the program in serving those truly in need of affordable housing. The household income cap of $87,400 is too high. Most financial advice on housing expenditure recommends a limit of 40% of pre-tax income. In this example $34,960 would be available for housing. Does anyone who can afford to pay $2,900 in rent each month really need a subsidy of 20 percent off the market rate?

    One has to wonder why council was eager to approve this program. Is it just an easy way of appearing to address the affordable housing problem?

  9. SM says:

    I have observed comments on this website calling for governments at all levels to do something to make housing more affordable. This is not only a local issue. It is not a matter of our Council luring money into the community to displace local residents. No one put a gun to those folks heads and forced them to sell. Instead everyone of them saw an opportunity to make a healthy tax free return on their housing investment. Our local market was attractive to investors in the early days. However the spectre of high prices affects most of the markets in the country. Read this story from the CBC News website:
    Just a couple of years ago, one could not give houses away in Oshawa. Now prices of what I would call shacks are north of half a million, usually way north.
    This current story outlines a proposal by Social Services that if implimented might provide a few housing units to that demographic that can’t afford this current market. Yet the reaction is not positive at all.

  10. Dennis Fox says:

    I am a retired guy who really expects to share with those who need it, that is the responsible thing to do. However, over the years I have witnessed Council after Council spend huge dollars to attract people to our community (tourists or permanent) -council wanted you here – IF you had MONEY! Seriously, they had a plan called “The Tourist Destination Alliance.” They got what they wished for – a bunch of old people with dollars and drove away County families, resulting in higher real estate prices. So anyone now wanting a STA or an additional flat sure doesn’t need my money, nor yours to do it!

    Anyone believing that this plan will help address the affordable housing issue in PEC is dreaming. The only ones to benefit will be those taking the money. Just who will monitor the use of these units and how often? How much will they be paid by the taxpayers? I would rather see the $250K given to the Salvation Army, rather than to the rich who don’t need it. This is a money grab and nothing more – our Council needs to rethink this.

  11. Carl and Velma McFaul says:

    I do not see why it is necessary to give 8 to 10 forgivable loans to people to build granny flats. Who do you think has to pay for this? I am sick of my taxes going up year after year because of the careless spending of this council. What I get for my tax dollar is very little. Our road is full of holes and the road people seem to think the best time to fill them is when they’re full of water.

  12. Henri Garand says:

    This story has many puzzling financial figures.

    Consider the example of a homeowner who receives a loan of $25,000 to construct or renovate a long-term rental suite. The loan is fully repayable if the suite is not rented for at least 15 years at 20 percent below market rates. The story cites the county’s 2020 rental rate for a one-bedroom suite as $799. A homeowner receiving a loan would therefore have to rent the suite for approximately $640 per month, or $160 less than the market rate. Over a year the homeowner would forgo $1920 in rental income, and over 15 years a total of $28,800. The 13-year breakeven point on the loan may be justifiable for a one-bedroom unit. But what if the rental is for two or three bedrooms at market rates of $1500-2000? A 15-year commitment would be absurd when the breakeven point comes in five to seven years. Why would any homeowner honor these terms?

    Now consider the potential tenants. Minimum wage in Ontario provides a full-time income of around $30,000. One might therefore expect a low-income household to earn a maximum of $60-70,000. Yet the story indicates that qualifying tenants can earn as much as $87,400. Current median household income in Ontario, as far as I can determine, is close to this figure. So the program implies that anyone who earns less than the average needs subsidized housing.

    One thing is certain. Since the program will use 10 percent of its budget for administration, it will create another government job.

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