TCHC Denied Lower Mortgage Rates by Crown Corporation
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TCHC Denied Lower Mortgage Rates by Crown Corporation

The TCHC needs lower interest rates in order to tackle it's multibillion-dollar repair backlog, but in spite of a massive surplus and an affordable housing mandate, its main mortgage lender isn't budging.

The Toronto Community Housing Corporation is asking its main mortgage lender, the Canada Mortgage and Housing Corporation (CMHC), to renegotiate antiquated interest rates, most of which are in the double digits. But the beleaguered social housing agency is not getting the relief it wants.

The request is part of the TCHC’s effort to raise $2.6 billion over the next 10 years to repair Toronto’s crumbling social-housing infrastructure. More than half of the 2,200 buildings are more than 50 years old and are at the end of their useful life cycle. Now these homes are in dire states of disrepair and the TCHC predicts that, at the current rate of deterioration, 75,000 social housing units will be boarded up by 2023.

The corporation has asked the City of Toronto, along with provincial and federal governments, to contribute $864 million each toward the capital repair backlog. So far, Toronto has committed $915 million, but the province and feds—both of which launch their budgets this week—have shown little interest in contributing their portion.

Part of the federal contribution would come from a request that the CMHC, a Crown corporation, reduce its interest rates on TCHC properties. The problem, however, is that most of the CMHC’s mortgages are decades long and non-renewable. Typically, mortgages can be renegotiated every five to 10 years, but, as Councillor Ana Bailão (Ward 18, Davenport) explains, “when you’re a social-housing provider, you try to have long-term mortgages, but some past interest rates were much, much higher than they are now.”

That means the TCHC is still paying 1980s rates to the CMHC on some mortgages, for example—that’s about 12 per cent interest on buildings, which today would enter into mortgages at roughly 3 or 4 per cent. “The questions is, can we find a way to renegotiate these mortgages?” asks Bailão—something city council has been asking the CMHC for two years now.

Bailão is leading a working group tasked with resolving TCHC’s capital repair backlog. In 2013, the group successfully negotiated lower interest rates with Infrastructure Ontario for 18 TCHC properties, a deal that freed up $93.5 million for the corporation.

“We were able to negotiate very competitive rates,” says Bailão, “so we were trying to see if we could do the same thing with CMHC.”

The CMHC’s mandate, as stated on its website, includes “helping low-income families, persons with disabilities, seniors and Aboriginal Canadians access affordable housing, [and] ensuring housing markets function efficiently to help Canadians access a range of housing options.” Despite this pledge, the wait list for affordable housing in Toronto is pushing 92,000 units, and without investment from other levels of government, 10,000 TCHC residents will see their homes closed by 2020 due to being in states of disrepair.

“We’re losing housing faster than we’re replacing it,” says Adam Vaughan, the Trinity-Spadina Liberal MP who says he left Toronto city council to ensure the next federal government develops a strong affordable housing program. “The state of good repair is in such a shoddy condition that even the houses we’re not closing are barely livable,” he adds.

“We’re losing housing faster than we’re replacing it.” – Adam Vaughan, Liberal MP

The poor conditions stem in part from dwindling federal support for social housing. In 2012, Toronto received $161 million from the CMHC’s main national housing program—a contribution that will decrease to $116.5 million by 2017 despite increased social housing needs. During that same period, the number of CMHC-supported houses will drop from about 600,000 to 492,500 nationwide, and, given the current forecast, federal funding for social housing will be gone by 2031.

Part of the funding loss comes from CHMC subsidies expiring. Between the 1950s and early 1990s, CMHC signed long-term operating agreements with social housing providers that were tied to the mortgage periods. These annual subsidies helped pay operating costs, like monthly rent and mortgages. But as those mortgages matured, municipalities began losing critical subsidies for social housing providers such as the TCHC. Without federal support for covering basic operating expenses, cities are straining to foot a much larger bill. “[The TCHC] is surviving now,” says Bailão, “but we need those savings to help tackle the backlog.”

While the CMHC cuts subsidies and refuses to negotiate lower interest rates, the company boasts massive annual surpluses. In 2013, it reported a $1.8 billion net income—77 per cent higher than the previous year and 10 per cent lower than projected for 2014. CMHC controls about 30 per cent of the country’s GDP (mostly in outstanding home loans), but Philip Abrahams, general manager of the Shelter, Support and Housing Administration for the City, says Ottawa should be concerned about the economics of potentially losing the TCHC. “The federal government has invested an enormous amount of money in a huge piece of social infrastructure and it’s important to maintain that social asset,” he says. “It would really be a shame to have invested that money and then just let the asset crumble.”

The CMHC responded to Torontoist by email, writing, “CMHC is committed to working with the Province of Ontario and with TCHC to assist them in analyzing their portfolio and reviewing their options as they relate to re-financing existing mortgages.”

And while the TCHC hasn’t yet received any commitments from the federal government or CMHC, Bailão is hopeful that will change as election time approaches. “We’re hoping this will become an issue all three parties will have on their agendas,” she says.

“It’s essential for a city like Toronto, which is the economic engine of this country, to make sure its citizens are housed properly,” says Bailão, pointing out that the 10-year plan would boost GDP by $18.5 billion, create 14,000 jobs, and avoid $3.8 billion in health-care costs.

“This is an issue that is affecting our country,” she adds. “We need a federal government that is going to take leadership on it.”