New bylaw could encourage affordable housing

The idea of exploring municipal contributions and property tax assistance for the development of affordable housing was approved by council at Thursday’s committee of the whole meeting.

Staff recommended the County adopt a municipal capital facilities bylaw, a tool promoted by the province, to encourage private sector and not-for-profit affordable housing development, something noted that has been used successfully in other municipalities.

“This parallels what other municipalities in the province have done, both large and small,” said Charles Dowdall, executive director, Prince Edward County Affordable Housing Corporation (PECAHC).

He noted of the 444 municipalities in Ontario, 291 have this bylaw in place for the development and incentivization of affordable housing.

A joint report from Dowdall and Amanda Carter, Director of Finance and IT with the municipality, stated PECAHC is making progress on a number of Canada Mortgage and Housing Corporation (CMHC)-financed projects that will see rental units under construction and available in 2023.

“An effective strategy to create affordable and attainable housing units in substantial amounts (for ownership or rental) will require a range of actors involved, including private sector and not-for-profit developers,” noted the report.

To address the current lack of affordable housing, staff reviewed various options that would provide incentives for the development of affordable housing (home ownership or rental) by non-profit organizations and private developers.

“The most effective incentive, which has been adopted by many municipalities in the province, is providing a full or partial property tax exemption for specified affordable housing projects on vacant land,” said Dowdall and Carter.

Looking at those municipalities offering similar incentives, it was found the offering of financial incentives acted as a catalyst for the development and interest in proceeding with the development of affordable housing by non-profit organizations and private developers.

“Staff found that purpose-built rental is very unusual due to the high cost of construction for multi-residential in comparison to a single home construction, in addition to the on-going partnerships required to support residents and manage the building, especially in the case of supportive housing,” they stated.

“As a result, without any financial incentives, the development of affordable housing by non-profit organizations and developers is less attractive due to pro-forma that cannot be financially serviced nor meet the financing or funding requirements of provincial funders, federal funders, or private sector capital markets.”

Dowdall described the bylaw as an “incentive tool” with the intent to provide incentive to both non-profit organizations and private developers, or through a P3 (public-private) partnership for the development of affordable housing.

If approved, Dowdall said this bylaw would allow for the exemption or partial exemption of taxes on vacant land where affordable housing is being developed.

Councillor Brad Nieman asked if the incentives were for full affordable housing or mixed, further enquiring when those decisions would be made.

Dowdall clarified the bylaw would only be applicable to affordable or super affordable housing and would not be applicable to those that are market rent.

Councillor Phil Prinzen asked whether the 15-year term for the housing to remain affordable was long enough, where he asked if it could be made longer, such as 25 years.

Dowdall confirmed it can be longer, but the 15 year reference lines-up with what other municipalities use as their litmus test.

“I would suggest not to go beyond 20 years, because that parallels any requirements under any form of CMHC funding,” Dowdall confirmed.

Councillor Bill Roberts clarified with Dowdall the point that the new bylaw is about providing a financial incentive for affordable housing on vacant land.

Roberts asked whether Bloomfield’s LoveSong project would qualify for this incentive since there is an existing building in the former Pinecrest school.

“My understanding is that it is a multi-phase approach with existing structure and vacant land,” Dowdall explained. “The tax exemption would not be applicable to the current structure, but would be applicable to vacant land on the property.”

Roberts also raised the point of having taxation on the vacant land during development and construction phases.

“Given that tax on vacant land is already very low, there seems to be a logical inconsistency of giving and taking at the same time,” said Roberts.

Roberts made an amendment to the motion (which carried) for an exception to include ‘during the development and construction phase’, meaning property taxes would only be charged upon occupancy.

Councillors Kate MacNaughton and Phil St-Jean both said they would prefer a 20-year period.

St-Jean also asked who would decide what incentive is applied to each project and when is it decided, where Dowdall confirmed it would be reviewed and vetted by municipal staff and come back to council.

Mayor Steve Ferguson asked how much interest there was from the development community to take advantage of the incentive program.

Dowdall said they have had a considerable number of discussions with developers from a diversity of housing developments, whether mixed market and affordable or just affordable, or affordable and supportive.

“We have heard loud and clear that tax exception incentive is a game changer for them,” Dowdall said.

“To use their terminology, without that kind of incentive, the affordable component may not come to fruition and you may not see that type of purpose-based construction because the numbers are what we call “under water”.”

He said to make up the difference, developers are taking a loss as costs are then offset on the market side.

Councillor Ernie Margetson asked if all applications would be entertained, and if more than enough applications were received, would preferences be made.

Dowdall confirmed there would be a limit, but it would depend on the number of applications and the number of properties involved.

“We have nobody building this now,” chimed in COA Marcia Wallace.

“I do not expect 50 applications. Council will be approving every single one of the agreements,” she said. “We have written this bylaw to be as flexible as possible, because frankly, we do not know what it will take: some sites are harder than others, it depends what they want to build.”

Prinzen’s motion to change the duration of the incentive agreement from 15 years to 20 years carried, along with the property tax exemption to begin at the construction phase.

A deputation by Tim Neeb, president of Mahogany Management, a Mississauga-based real estate developer spoke to how the city of Toronto provides exemptions to fees for planning applications, residential property taxes, parkland dedication, building permits, and development charges.

Neeb said he is the only person in Ontario who only builds affordable and supportive housing and he has been doing so for over 22 years, where he works with various levels of government to be able to provide a very high quality of affordable and supportive housing in Toronto, Oshawa, Barrie and Clarington.

He spoke briefly to a few of the 25 projects he has undertaken, noting that he could not build a quality affordable project without a municipal capital facilities bylaw.

“Because the incentives are there, it is the only way we can build this type of housing,” said Neeb. “Otherwise, it’s just not possible; you’ve either got to go out and get a huge grant from somebody or you have to get some of these incentives,” he said.

Councillor Jamie Forrester asked Neeb if he has more success when the rental units are a mixture of affordable, market value and super affordable, asking what the best scenario is.

Neeb said he personally liked to build a mix of supportive housing and a mix affordable housing.

“My goal is to keep it all affordable, and some super affordable, that’s always my goal and that works really well,” said Neeb.

Forrester also asked about small co-ops where the residents help maintain the facility by carrying out duties in order to keep the rents low.

“You don’t hear much about that any more, is that a possibility?” Forrester asked.

Neeb said he isn’t aware of a co-op being built in 15 years, but noted it was an interesting question.

Margetson asked Neeb what his experience is with home ownership regarding the municipal capital facilities bylaw, as opposed to rental, where Neeb confirmed his experience is only with rental.

“Mr. Neeb is very keenly interested in undertaking this kind of development in Prince Edward County,” Dowdall confirmed.

“As well, I have spoken with six other developers, local and from the metropolitan area, who are also very keenly interested in affordable housing development, either on its own or mixed, if there is a property tax incentive attached to it making it affordable for the developer.“

A comment made by John Uings, a board member with LoveSong Seniors Housing said LoveSong were in full support of the proposed bylaw and would like to see it enacted.

“It’s heartening to see where you have come from in last few months, in large part due to the reorganization you have put in place and the way you manage affordable housing,” said Uings.

He said the proposed change will have at least two positive effects for any affordable housing project.

“It will obviously reduce operating costs and make it easier to maintain affordable rents and that is absolutely crucial given the recent interest rate hikes,” expressed Uings.

He also noted how the property tax relief begins only when the project is operational and will not apply during construction phase.

“I cannot begin to imagine why you would want to exclude that from the bylaw,” he said. “I encourage you to consider making the relief to property taxes apply during the construction phase.”

The report noted that in order for the bylaw to be supportive of the development of affordable housing, in the case of home ownership, at the very least, the purchase price of the home must be at least 10 per cent below the average purchase price of a re-sale unit in the regional market area.

Further, annual accommodation costs should not exceed 30 per cent of the gross annual household income for low- and moderate-income households.

“In the case of rental housing, at the very least, the unit rent must be at or below the average market rent in the regional market area and the rent does not exceed 30 per cent of the gross annual household income for low and moderate-income households,” the report said.

According to staff, the new bylaw would offer financial incentives in the form of a conditional grant, or exemption from all or part of the property taxes levied; or exemption from all or part of the development charges imposed by the municipality for the development of affordable housing located on vacant land.

Eligibility for the financial incentives would mean each housing unit developed must meet a number of requirements, including meeting the definition of affordable housing, meaning that the total accommodation costs for either rental or ownership must not exceed 30 per cent of the gross household income.

“Further in the case of a rental unit, the rent must be at least 20 per cent below the average market rent for the regional area,” stated the report.

The requirements also require each housing unit developed must remain affordable for at least 15 years (or the developer must repay all financial incentives and costs).

The matter comes back to council’s Sept. 13 meeting for enactment.