The City of Toronto, in a concerted effort to create a supply of new, affordable housing, is establishing a new, more receptive and supportive environment for collaboration between the public, private, and non-profit sectors. The City has been seeking innovative expressions of interest for a number of demonstration projects to create rental and home-ownership opportunities for low- and moderate-income households. These initiatives are intended to occur on surplus, City-owned sites, as well as on land or in buildings currently owned by institutional and private sector proponents. The intent is to encourage the development of affordable housing that does not involve any direct City operating subsidies and that makes homes available to households that, until now, have been excluded from the market or forced to spend too much of their income on housing.

Very little truly affordable (or rental) housing has been produced in the 1990s in Toronto. Efforts to encourage the private sector to step in where governments left off have yielded virtually nothing in the way of “on-the-ground” housing. With this in mind, and seeing little evidence of immediate involvement from other levels of government, the City decided to make land and other special incentives available to help the non-profit and private sectors to develop rental and affordable ownership homes. In addition, it is intended that some of this new housing be targeted to specific needs groups. (Unfortunately, one current impediment to the private sector’s immediate involvement is that portion of the Municipal Act (s. 111) that prohibits the City from directly or indirectly assisting any commercial enterprise “through the granting of bonuses in aid thereof.” The removal of this impediment is being discussed between the Province and the City).

Toronto’s objectives for affordable housing are to:

• produce rental units at rent levels affordable to households that otherwise cannot afford housing in the market;
• produce home-ownership units that are affordable and marketed to modest-income households who are first-time buyers and will occupy their homes;
• receive the highest land price consistent with their affordability goals and with the physical plan objectives for the sites that may be from time to time declared surplus to the City’s needs;
• demonstrate the impact on affordability of any City capital cost write-downs that may be provided by the City, subject to the current impediment inherent in the Municipal Act prohibition against directly or indirectly granting bonuses to any commercial enterprise;
• create replicable models for affordable rental and home-ownership projects that do not require any extraordinary long-term enforcement or involvement by the City;
• demonstrate positive architectural, urban design, and planning values.

Research suggests that a combination of tools, such as reduced land costs and equalizing property tax rates for new rental buildings with the residential rate, can make it feasible to produce rental housing. Additional equity contributions or reduced financing costs could also help produce housing that is more affordable and below market prices. In response to the Final Report of the Mayor’s Homelessness Action Task Force the City has instituted a “Housing First Policy” and a $10.9-million Capital Revolving Fund for Affordable Housing (CRF) to spur the development of affordable housing projects and provide limited financial assistance, where appropriate. The resources of the CRF will assist in the creation of new, affordable homes in various ways. Assistance may take the form of capital grants, loans, or forgivable loans (but not operating or service subsidy funding). Affordable ownership projects are eligible for repayable loans. As a rule of thumb, assistance from the CRF is restricted to no more than 15% to 25% of total project capital costs.

Capital assistance may be provided in the form of a reduced land price by way of a long-term lease at nominal cost, grants secured by a performance or operating agreement, or low-cost second mortgages.

The definition of “affordable housing” to apply to the CRF is to be established by Toronto City Council, according to CRF management guidelines adopted by Council. No firm definition has yet been approved. For current purposes, the definitions below are being used.

Rental housing: Affordable rents must be at or below 90% of the average market rents as measured by the 1998 Canada Mortgage and Housing Corporation rental survey, and shown in Table 1 as “maximum affordable rent.” To receive funds from the CRF or other possible benefits from the City, market rent units may form part of a development, but some units (at least 25%) must fall at or below the “maximum affordable rent” levels. It is expected that rental housing meeting the Table 1 “maximum affordable rents” will meet the affordable housing definitions in the current Official Plans of the municipalities of the former Metropolitan Toronto.

Table 1: Rent levels

	Target rent (based on shelter component)	Maximum affordable rent
Bachelor/studio	$325	$530
1-bedroom	$515	$650
2-bedroom	$515–$602	$800
3-bedroom	$602–$649	$960

Home-ownership housing: The City’s target market for non-rental housing would be first-time buyers who will occupy their units. Affordable housing costs would include mortgage payments, property taxes, maintenance fees in the case of condo-type units, utilities, and property insurance. Affordable housing costs should not be greater than 30% of gross household income with a 5% downpayment. Assumed interest is 7.5% with a 25-year amortization.

The City’s approach to achieving its housing goals is “to create an environment in which the private sector and community providers will be willing and able to develop affordable housing for people with a range of housing needs that are not currently being met in the market.” The hope is that the various mechanisms outlined above will allow the City to achieve its objectives.

Mark Guslits