Who’s really paying for Toronto Community Housing repairs?

Mayor John Tory says the city has contributed its fair share to stem a growing crisis of crumbling social housing crisis. The Star analyzed the numbers.

Thestar.com
May 11, 2017
By Jennifer Pagliaro

Mayor John Tory has repeatedly said the city has paid its fair share for social housing repairs.

“We have shown our leadership in good faith on this,” he told CBC’s Matt Galloway earlier this month.

The city, Tory has said, used “every reasonable tool” to fund more than $1 billion of a $2.6-billion, 10-year repairs plan - “City of Toronto dollars, derived largely, as you know, from property taxes,” he told reporters last week, along with other “city-derived” tools, such as refinancing.

A Star analysis of accounting by Toronto Community Housing, which has been clarified with city staff, shows the vast majority of what’s been spent so far has not come from property taxes. Very little is a direct contribution from the city.

With a lack of funds from the other levels of government, that accounting may be at the forefront of a coming council debate over the 2018 budget, with staff recommending a spending freeze while Tory remains politically unwilling to raise property taxes above the rate of inflation, as he promised voters in 2014.

While the repairs pile up, with an outstanding $1.73-billion bill, a war of words between governments on who’s responsible to pay continued this week.

To date, Premier Kathleen Wynne’s Liberal government has failed to commit to a one-third share of repair costs as requested by council after downloading the responsibility for social housing to cities and then abruptly cancelling $150 million in annual funds to help compensate the burden it placed on Toronto, which is the largest social housing provider in Canada.

Prime Minister Justin Trudeau’s federal government has committed to reinvesting in social housing, with details of that plan - how much money will be available for repairs and when - still unclear.

That has left a massive hole in the immediate repairs plan, which has devastating consequences: Toronto Community Housing plans to have closed 1,000 units by the end of next year without additional funds, relocating families and creating an additional backlog on a wait-list already 181,000 people long.

“Let me be very clear: any closure of such units would be a direct result of the inaction of the other governments to partner with us in carrying out those repairs,” Tory said last month, as his office continues to urge the province to come back to the table with money.

Critics say Tory has so far failed to show the leadership required to plug the funding gap in the absence of help from other governments, with hundreds of units already closed.

Council approved the $2.6-billion repairs plan in 2013. They requested the federal and provincial governments each contribute a one-third share of the cost - or $864 million. Neither higher order government committed.

But Toronto Community Housing pushed on with the plan. Between 2013 and the end of 2016, $911 million was spent on repairs.

So, where did that money come from?

Of the $911 million, most of it - $623 million -is the result of refinancing of both TCH mortgages and city loans.

That’s not funding the city has provided Toronto Community Housing.

Like you might do with your own house but on a much larger scale, the corporation renegotiated to extend the term of the mortgages at much lower rates on dozens of its properties - what’s called a blend and extend approach. That freed up funds to be used for repairs.

While the city was required to guarantee repayment on behalf of TCH, the refinancing has “no immediate impact on the city’s operating or capital budgets,” a recent staff report reads. It does include, in some cases, the future risk to the city and taxpayers owing additional mortgage repayments, which is money that has not been set aside or budgeted for.

Another $71 million was raised from the sale of standalone TCH homes.

And $101 million has been used towards repairs as the result of the city exempting property taxes and development charges.

Some of the repairs funding does come directly from taxpayers.

A total of $116 million was paid through TCH’s operating budget, which is in part funded by an annual subsidy from the city.

In 2013, the city directed TCH to put aside around $50 million of an approximately $200 million subsidy for repairs every year. That total subsidy actually decreased between 2013 and 2016 by $4 million. In recent years, TCH has faced significant budget pressures, such as skyrocketing energy costs, which created a gap in their operating budget. As a result, less funding has been allocated toward repairs.

For the first time last year, council agreed to a one-time increase in the subsidy to cover a more than $30-million budget gap, allowing repairs to stay on track.

A total of $250 million was budgeted, primarily from refinancing plus a $53-million injection of cash from the federal government.

Next year, the repairs plan is $350 million short on cash.

How the city would cover that gap without help from the other governments remains unclear.

Every 1 per cent increase in property taxes brings in roughly $25 million in revenue for the city, meaning a double-digit increase would be required to keep up with repairs through a property tax hike alone. Tory continues to make the case that kind of burden was never meant to be borne by the municipal tax base.

“It’s important to note that at the end of the day, taxpayers, through the city, continue to support TCHC through annual subsidies, loans and mortgage refinancing, and debt guarantees,” read an email from city spokesperson Wynna Brown.

Toronto Community Housing buildings remain a massive asset owned by the public - totaling $9 billion at last count.

As it stands, that asset continues to literally crumble to the ground.