Federal withdrawal results in loss of social housing by policyfix

by Sarah Cooper

Manitoba is losing subsidized rental housing units—a delayed result of the federal government’s withdrawal from funding social housing in the 1990s. As operating agreements between the federal government and housing providers expire, the subsidies expire with them. As a result, nonprofit housing organizations and housing cooperatives are having to make tough decisions. Many subsidized units have already been lost; many more are likely to be lost in the next two decades.

In the 1960s – 1980s, thousands of units of social housing were built in Manitoba, the number of new builds dropped off in the 1990s. The federal government entered into long-term social housing operating agreements with provincial governments, nonprofit housing providers and cooperatives. These operating agreements have provided subsidies that reduced tenants’ rents and laid out terms for how the housing would be managed, including details about reserve funds, subsidies and eligibility requirements for the subsidized units. In most cases these agreements were set for the term of the mortgage, usually 35-50 years.

Currently, Manitoba has about 35,000 units of social housing, which include non-profit, co-operative and public housing units. About 20-30 percent of the 17,500 non-profit and co-operative social housing units are rent-geared-to-income (RGI) units, while about 98 percent of Manitoba Housing’s 17,500 units are RGI. This means they are subsidized enough to be affordable for low-income people.

Manitoba’s social housing operating agreements with the federal government started to expire in 1999. By 2014, the agreements governing about 5,000 units had expired, including about half the rural and Urban Native housing in Manitoba. All of Manitoba’s social housing operating agreements will have expired by the end of 2032.

For some housing organizations, the end of the operating agreement is an opportunity to move in new directions that are no longer constrained by the agreement’s rules. For example, they might use the equity in their buildings to refinance and renovate their buildings, or to build new housing. Or, an organization might play with the RGI balance among its units, by raising some units to market rents and using the surplus from those rents to subsidize RGI or lower end of market rents in other units.

However, all the housing providers that have RGI units and whose agreements have expired are facing financial difficulties, because they require some form of subsidy to continue to provide housing to the same low-income household demographic. Once the subsidy is no longer provided by federal or provincial funds, this significant cost will have to come from the organization’s own budget.

This challenge is magnified for non-profits and co-operatives that offer 100 percent RGI housing. If 100 percent of the units are subsidized, there are no extra funds that can be moved around to adjust rents or create subsidies. When the operating agreements end and the subsidy disappears, there is nowhere for the non-profit to find the additional money needed to bridge the gap between what the low-income household pays in rent, and what it costs to manage the unit. In these cases, rents will not be sufficient to cover the buildings’ maintenance costs over the long term. To cover ongoing operating costs, the organization will most likely have to sell some units, or raise rents beyond RGI levels in some units, to offset the subsidies it provides.

Like the non-profit and co-operative housing, public housing—housing owned and operated by Manitoba Housing—is also facing the expiry of its operating agreements. Almost 100 percent of the public housing in Manitoba is RGI, and without additional funds, Manitoba Housing faces a significant challenge in continuing to deliver housing subsidies as agreements expire. Although Manitoba Housing can draw on a larger pool of resources than any single non-profit or co-operative, it is competing with the many other demands and needs in the overall Manitoba budget process. It also has a broader mandate of supporting housing for all of Manitoba—including through non-profit and co-operative housing providers.

As the subsidies disappear, non-profit organizations and co-operatives face the challenge of maintaining aging buildings that are now at least 25-50 years old. Each organization’s reserve fund was intended to provide funds for capital improvements to the buildings, but some non-profits and co-operatives do not have adequate reserve funds in place. Many organizations now find themselves in dire straits as they approach the end of their agreements, facing years of deferred maintenance, increased capital costs, and low reserve funds.

Responsibility for social housing was transferred from the federal government to the Province in the 1990s and now, as operating agreements end, it is being transferred again to the housing providers themselves. This process reduces the role of the government: rather than addressing housing at a holistic, societal level, the lack of ongoing subsidy and support puts the onus of providing social housing on much smaller organizations, resulting in a patchwork of uneven benefits across the country.

Social housing is intended to address the issue that low-income households cannot afford decent housing. In the absence of subsidies, housing for low-income households does not generate enough revenue to sustain itself. According to the 2011 National Household Survey, about 19 percent of all Manitoba households—including 35 percent of renter households—spend 30 percent or more of their household income on housing. These figures point to a significant proportion of Manitoba households that cannot afford decent quality housing. Clearly, there is a need for more social housing in Manitoba; as the population continues to grow, so will the need.

There is some good news: the Province of Manitoba has made a five-year commitment to assist the 100 percent RGI Urban Native organizations to continue to provide subsidized units. As well, the Province has determined that, of the 26 Manitoba non-profit organizations and co-operatives with agreements expiring before 2016/17, only five will require assistance. Where necessary, it has made a five-year commitment to these organizations to continue to provide the subsidy as they work to get their finances in order. However, it is unclear whether the other organizations are continuing to offer subsidized lower end of market or RGI units, and whether they will be able to continue to offer those subsidies into the future.

The Government of Canada has stated that it considers its obligations fulfilled once the agreements expire. To ensure that all households in Canada have access to decent housing, it seems clear that we need a re-thinking of federal government housing policy.

Sarah Cooper is a PhD student at the University of Illinois and a CCPA MB Research Associate.

Full report: A Terrific Loss: The Expiring Social Housing Operating Agreements in Manitoba

The launch of the report is taking place today, Friday November 21 at the West End Commons, 641 St. Matthews Ave. at 1:30 pm, lower level