Modular housing cost Toronto up to twice as much as originally budgeted, says city watchdog

City staff blamed tight deadlines for federal funding for the cost overruns of the pandemic-era program to house homeless people.

thestar.com
July 21, 2023

The city paid as much as double the original estimate to build modular homes for homeless people under a pandemic-era program, partly due to “insufficient planning” by municipal staff, according to Toronto’s auditor general.

In a report debated at council on Thursday, Auditor General Tara Anderson found that since 2020 the final cost of five modular housing projects has spiked by 63 per cent, to $85.4 million, up from an original estimate of about $52.3 million.

The cost of one project, a 57-unit development at 39 Dundalk Dr. in Scarborough that’s expected to be complete this month, increased to almost $22 million --- twice the original budget of $10.8 million.

In her report, Anderson attributed the rising costs to “insufficient planning, unbudgeted site preparation costs and change orders.” Inflation, supply chain disruptions and labour shortages caused by COVID-19 also played a role.

During her investigation, city staff reported that the “aggressive timeline” imposed by the federal government, which helped fund the projects through the Canada Mortgage and Housing Corporation (CMHC), meant they “had to make decisions quickly and fast-track the projects as much as possible, which gave them less time for due diligence and project planning,” according to the report. Housing staff told council the dire situation on the city’s streets and in its shelter also drove them to move fast.

After Thursday’s debate, council approved 20 recommendations from the auditor to strengthen controls around the construction, planning, budgeting and contract management of the quick-build housing.

Council launched the modular housing initiative in April 2020 as an urgent response to Toronto’s homelessness crisis, which had been exacerbated by COVID-19. The units are prefabricated and then assembled on site, and are supposed to enable the city to deliver supportive housing to vulnerable people faster and at lower cost than traditional construction.

Residents are given access to services like mental health and addiction supports, and proponents, including former mayor John Tory, have described the strategy as the type of quick-footed response required to address the city’s housing needs.

The city’s initial goal was to create 250 new supportive units, a number that later rose to 275, at a cost of about $190,000 each.

The auditor general found that while the average per unit cost of the two projects in the first phase of the program was below that target, for three developments in the second phase it rose to $268,302. The program is now $33 million over budget and “expected to increase further,” according to the report.

To date, the city has completed 159 units at three locations. Those finished so far were ready for occupancy between five and 13 months after construction began.

Anderson told council she was unable to determine whether the program met its goal of delivering housing more quickly and at lower cost than regular construction, due to lack of documentation.

Coun. Lily Cheng (Ward 8, Willowdale) has raised objections about a modular housing project in her ward at 175 Cummer Ave., and last month unsuccessfully moved a motion attempting to relocate it. The project has been delayed because of a zoning dispute involving the provincial government and local residents’ groups, which has added more than $1 million to the cost.

In a speech to council Cheng said the lesson from the auditor’s report was “haste makes waste.”

“I am fully supportive of supportive housing. It is the answer that we must have to alleviate homelessness and support the most vulnerable in our community,” she said, but sometimes “in our own urgency we may skip important steps.”

A spokesperson for Mayor Olivia Chow said she remains supportive of the program despite the cost overruns.

“The mayor believes we need to build all types of housing in this city, including modular housing,” said Shirven Rezvany in a statement. He said “the city can do better in the administration of the program,” but the modular homes have already demonstrated they can “help people leave shelters and find stability quickly.”

A spokesperson for the CMHC said the program is “solely delivered by the city of Toronto” and the federal Crown corporation couldn’t comment on the auditor’s report.

In a separate decision Thursday, council approved the auditor general’s recommendations to improve city procurement processes, after she reported that limited competition for Toronto’s $1.5-billion, 10-year snow maintenance contracts potentially cost the city an additional $24 million a year.

Staff to report on Ontario Science Centre ideas

Council will also have city staff look at what the future of the Ontario Science Centre could look like after the province announced programming would be moved from Flemingdon Park to Ontario Place.
Some councillors, including Josh Matlow (Toronto---St. Paul’s) and Jon Burnside (Don Valley East), are pushing back on the province’s plan, concerned about the loss of educational opportunities in the neighbourhood.

Part of council’s request to staff is to consider the feasibility of the city running the science centre in its current location in Flemingdon Park and how much money the city could make through event rentals at this site.

Mayor’s race motion defeated

Meanwhile, a motion from Coun. Stephen Holyday (Etobicoke Centre) to ask the provincial government to look at making it harder for people to register for future mayoral races, after 102 people ran in the last mayoral election, lost on a tie.

Some councillors opposed to the motion said it was too narrow, instead wanting the province to look at broader election reforms like including online voting and non-citizen voting.