A federal program that has approved billions in loans to build more rental housing across Canada uses a formula that allows above-market housing to count as affordable housing, according to researchers hired by the National Housing Council appointed by the federal government.
The Rental Construction Finance Initiative, or RCF, was first introduced in the 2016 federal budget. The idea was to stimulate rental construction and stimulate the type of supply that some experts consider a key factor in battling prices in hot real estate markets like Toronto’s.
Since its inception, thousands of new homes in Ontario have been advertised through the RCF.
But the authors of a recent report, from the non-profit organization Blueprint, say the RCF program’s affordability rules have not exerted “significant downward pressure” on prices – and in many case, the affordable portion of the resulting buildings charged more than local market rates.
Using actual and projected rental costs for RCF-funded sites provided by CMHC, the authors focused on a building in Laval, Quebec, where an “affordable” two-bedroom apartment would have cost $1,896, more than double the average of $903 for a local two-bedroom apartment. bedroom. In Winnipeg, they write, an “affordable” studio costs $1,756, or 2.3 times the average market price for a unit this size.
While the report didn’t provide specific examples in other municipalities, Blueprint researcher Conor Beer said it was a trend that popped up on the map. Of 62 developments for which price data was available, he and his co-authors found that only 23 sites – or 37% – produced units costing less than the average local market rent for that type of unit.
“A lot of these projects are above that line,” Beer said. “I would describe it as sort of a pattern that we’ve seen consistently, rather than an isolated thing.”
Blueprint’s findings align with concerns expressed by some affordable housing advocates, who have questioned the effectiveness of the RCF in creating a more affordable market.
To qualify for loans, a developer must set aside at least 20% of their homes as “affordable,” which the program says means they cost less than 30% of the median total monthly income of local families. This figure is often higher than the income of all households, including singles.
(The building’s total residential rental income must also be at least 10% less than might otherwise be achievable, says CMHC. other stricter criteria, if the project receives incentives or benefits through another government program.)
The RCF rules do not distinguish between unit sizes, the researchers noted, writing that in an area where the median family income is $70,000 a year, a studio could be considered affordable at $1,750. , while a three-bedroom would not be considered. affordable at $2,000.
While CMHC declined to confirm the Star’s calculations or provide the same data provided for the study, Blueprint did confirm that using the median total family income of $89,150 in Toronto in 2019, their understanding was that any rental could be considered affordable if it cost $2,228.75 or less, which is above Toronto’s 2021 average market rate for a three-bedroom apartment.
“This is clearly not affordable housing,” said National Housing Council co-chair Tim Richter.
He sees the initial strategy behind the RCF – which he sees as creating enough new rental supply to drive market prices down – as “flawed”. Operating in so many cities across the country, he questioned the prospect that the RCF or other programs were big enough to move the dial.
He thinks federal officials see “some challenges” with the RCF in its current form.
In a statement, CMHC said it welcomed the report and would “carefully review its findings.”
“We know that many middle-class households are excluded from the communities where they live and work,” the agency wrote, describing the additional rentals as creating “a stable supply.”
The council on which Richter sits aims to provide Federal Housing Minister Ahmed Hussen with recommendations based on the report by June or July, he said. One area of focus will be how federal programs could best help those most in need, he said — those living in unaffordable or inadequately sized homes, as well as those in homes in need of repairs. major repairs.
The report estimates that only 3% of housing in RCF-funded developments would be suitable and affordable for low-income households, a group that disproportionately faces these needs.
“Our focus now,” Richter said, “is really to see how we can improve it.”
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