"Rental Housing Update – City of Hamilton _PD01162_ _City Wide_"
PLANNING AND DEVELOPMENT DEPARTMENT CITY OF HAMILTON - RECOMMENDATION DATE: August 10, 2001 Author: M. Mascarenhas (Ext. 4604) K. Extance (Ext. 3745) Mayor and Members Committee of the Whole Lee Ann Coveyduck General Manager Planning and Development Department Rental Housing Update – City of Hamilton (PD01162) (City Wide) REPORT TO: FROM: SUBJECT: RECOMMENDATION: (a) That staff report back on a pro-active and comprehensive municipal strategy to increase the supply of rental housing in the City of Hamilton; and That the Mayor, on behalf of Hamilton City Council, send a letter to the Federal and Ontario Ministers responsible for housing pursuant to their August 14th and 15th Housing Ministers meeting in London, Ontario highlighting the growing shortage of rental housing in Hamilton and the need for immediate Federal and Provincial investment in new housing supply initiatives; and That the Federal Government be advised that the City of Hamilton through the Housing Division, Planning and Development Department, would be prepared to negotiate an agreement to assume municipal delivery of the new Federal Housing Supply Program if the Ontario Government opts out; and, That the Federal Government through the Canada Mortgage and Housing Corporation (CMHC) be requested to increase the amount of money allocated to the City of Hamilton under the Residential Rehabilitation Assistance Program (RRAP) for potential conversions of non-residential buildings to residential buildings. (b) (c) (d) Rental Housing Update – City of Hamilton (PD01162) Page 2 ________________________________ Lee Ann Coveyduck General Manager Planning and Development Department CORPORATE IMPLICATIONS: None at this time. BACKGROUND: Th Ontario Non-Profit Housing Association (ONPHA) and the Co-operative Housing Federation (CHF) recently released their annual update on the housing situation in Ontario (attached as Appendix “A”). The “Where’s Home? 2000 Update” highlights the growing crisis of inadequate new rental housing supply, tightening rental vacancy rates and rents increasing above the rate of inflation across Ontario’s cities. The rental market situation in the City of Hamilton mirrors the overall Ontario trends and is of increasing concern to City staff as highlighted by the following. Inadequate New Rental Supply Since 1999 a total of 3,827 new dwelling units have been constructed in the City of Hamilton. Of those 3,827 new units, a total of only 15 were intended for the rental marketplace. However, this level of rental production is far below the 770 rental units needed per year to meet future rental housing demand to the year 2021 based on the Housing Division’s “Household and Housing Demand Projection Model”. The absence of new rental housing construction in Hamilton and throughout Ontario is a result of the “gap” between economic rents and market rents. In other words, the difference between what it actually costs to build and operate new rental housing and what these units would be rented for in the marketplace. As an example, the economic rent for a new rental unit in Hamilton would be approximately $1,100 per month. It should be noted that this economic rent reflects changes recently implemented by City Council to lower the property taxes on newly constructed rental housing (Report FCS01015D). These changes will have the effect of reducing the property taxes paid by owners of newly constructed rental buildings by approximately $85 per unit per month. Rental Housing Update – City of Hamilton (PD01162) Page 3 Declining Rental Vacancy Rates The rental apartment vacancy rate as measured by Canada Mortgage and Housing Corporation (CMHC) has declined from a level of 3.8% in October, 1998 to 1.8% in October, 2000. A vacancy rate in the range of 2-3% is generally regarded as indicative of a balanced, competitive marketplace. For families with children in Hamilton seeking rental housing, the rental marketplace is even tighter as the apartment vacancy rate for two-bedroom and three-bedroom units are 1.4% and 1.2%, respectively. Further, the vacancy rate for townhouse units in the City of Hamilton has declined from a level of 7.6% in October, 1998 to 1.0% in October, 2000. Increasing Rental Rates Average monthly rental rates in the City of Hamilton are shown below: Unit Type Apartment – Bachelor Apartment – 1-Bed Apartment – 2-Bed Apartment – 3-Bed Townhouse - 3-Bed October, 2000 $462 $556 $676 $794 $855 October, 1998 $403 $513 $624 $751 $781 % Change 14.6% 8.4% 8.3% 5.7% 9.5% With continued strong economic and population growth, vacancy rates have tightened resulting in a strong upward pressure on rents. For those households on limited incomes, these rental increases are significant and a greater proportion of their income has to be spent on housing costs. In general, households that spend 30% or more of their household income on housing costs are considered to be experiencing a housing affordability problem. Based on Census of Canada data, it is estimated that approximately 31,000 renter households in the City of Hamilton, or 47% of the 66,230 total renter households, currently spend 30% or more of their income on rent payments. This includes approximately 15,500 renter households who are spending in excess of 50% of their income on rent payments. Dwelling Unit Rehabilitation In older urban municipalities such as Hamilton, it is essential that the stock of existing housing within the community be maintained and upgraded. It is estimated that approximately 15,000 dwelling units in Hamilton are in need of “major repairs”. This is defined as dwellings with defective plumbing or electrical wiring and/or dwellings requiring structural repairs to walls, ceilings and floors. Rental Housing Update – City of Hamilton (PD01162) Page 4 The City of Hamilton is a delivery agent for CMHC for the “Residential Rehabilitation Assistance Program” (RRAP) and has successfully delivered RRAP for the past 27 years. The City has provided rehabilitation assistance to over 4,200 homeowners during this period and more recently to rooming houses, lodging homes and private rental buildings. With the City as a delivery agent, there is tremendous opportunity for utilizing RRAP to build local and program partnerships to rehabilitate existing housing and increase the housing stock through new construction and conversion. The challenge for the City will be to emphasize to our Federal partner CMHC of the unsatisfied demand for additional RRAP funds in Hamilton. This is particularly evident in regard to “RRAP-Conversion” funding which assists in the conversion of non-residential buildings to low cost rental housing. This program acts as an additional financial incentive to stimulate new residential development in tandem with the City’s Downtown Convert/Renovate to Residential Loan Program. However, CMHC has set aside only $100,000 for program take-up in the City of Hamilton. In comparison, the City of Toronto received an allocation of $1.3 million. Of particular concern to staff is that currently there are owners of vacant buildings in Downtown Hamilton that are very committed to convert their buildings to low cost rental units. However, CMHC has not provided the level of funding under the RRAP Conversion Program that would permit these building owners to commence the conversion process. The current level of funding committed to the City of Hamilton by CMHC is clearly inadequate and must at a minimum be comparable to the funding levels committed to the City of Toronto. ANALYSIS: Since the termination of the various non-profit and co-operative housing programs in 1995, there have been no housing supply initiatives from the Federal or Provincial Governments. Several years ago, the major cities across Canada, including Hamilton, established the “Big City Mayor’s Caucus on Housing”. In co-ordination with the Federation of Canadian Municipalities (FCM), a national strategy on affordable housing was developed and strongly promoted to the Federal Government. In response to these concerted efforts, on May 29, 2001, the Federal Cabinet approved the establishment of a new Federal housing supply initiative. Rental Housing Update – City of Hamilton (PD01162) Page 5 The details of the program are being refined at the present time. It appears the program will be in the form of a capital grant and there will be a commitment to maintain rents at an “affordable” level for 10 years, although the definition of affordable has yet to be clarified. Although a permanent Rental Housing Supply Program would be preferable to meet long-term housing needs, the Federal Government should nevertheless be commended for beginning to recognize the unique housing needs of major metropolitan areas across Canada. The various Federal and Provincial Ministers responsible for Housing will be meeting on August 14th and 15th in London, Ontario to discuss the new Federal housing supply initiative and Provincial participation. The Ontario Government has publicly indicated they would not be participating in this new Federal housing supply initiative. This is particularly disturbing considering the tightness of the rental marketplace across Ontario’s cities and the absence of any sustainable private sector participation in the construction of new rental housing. The City of Hamilton has successfully delivered the Federally-funded Residential Rehabilitation Assistance Program (RRAP) in partnership with Canada Mortgage and Housing Corporation (CMHC) for the past 27 years. With its proven track record in delivering housing programs, the City of Hamilton should approach the Federal Government indicating their interest and commitment to deliver the new Federal housing supply initiative, provided the Ontario Government chooses not to participate. City Council’s commitment to encourage new rental housing in Hamilton is clear by its recent decision to lower the property taxes on newly constructed rental housing units. Based on experience in the United States and in other Canadian cities, it is apparent an overall strategy encompassing a package or series of changes, such as the property tax change, is required to get the private sector back in the business of building new rental housing. Accordingly, Housing Division staff is presently developing the framework for the “Hamilton Affordable Housing Partnership Initiative” (HAHPI) and will be reporting back to Council on this initiative in the next few months. HAHPI will be a multi-faceted municipal housing strategy with the goal of promoting, coordinating, facilitating and implementing a wide variety of housing supply initiatives in Hamilton. The focus of HAHPI will be to increase the capacity of the community to address housing issues. This will be accomplished by recognizing and harnessing the marketplace, co-ordinating the development of appropriate tools, including financing, and facilitating and promoting community development strategies and partnerships. Staff is very optimistic that the establishment of a new municipal housing strategy incorporating City Council’s recent property tax changes combined with the new Federal housing supply initiative will begin to address the shortage of new rental housing in the community and promote the development of other affordable housing opportunities. Rental Housing Update – City of Hamilton (PD01162) SUSTAINABLE DEVELOPMENT: Page 6 (Vision 2020, adopted by Regional Council as its vision for the future of Hamilton-Wentworth and endorsed by the Transition Board as the basis of a vision for the "New" City of Hamilton, embodies the concept of a sustainable community which is an equal balance of the economy, the environment, and social/health factors in all municipal decision-making.) The recommendations of this report will implement a goal of the “Land Use in the Urban Area” theme: • To encourage development which makes efficient and economical use of infrastructure and services. In addition, the recommendations implement Strategy #151 which notes the City will “respond to identified housing needs by… collaborating with community agencies and the development industry to provide new housing units and adaptively re-use existing buildings that will meet future community needs.” KE/MM:ke Attach. (1)