Item - 2013.EX35.4

At its meeting in October 2012, City Council approved Putting People First – Transforming Toronto Community Housing, the report of the Special Housing Working Group, chaired by Councillor Ana Bailão, which made a number of recommendations to address the significant capital repair backlog and set a new course for Toronto Community Housing (TCH).  This report responds to the request for the development of a capital financing plan. A companion report Putting People First: Moving Forward responds to a number of other recommendations arising from the Special Working Group's report.

Toronto Community Housing December 31, 2012 Capital Backlog - $862 million

The Putting People First report identified that the Toronto Community Housing capital repair backlog needed to be addressed and as a result the City and Toronto Community Housing have secured new sources of financing.  Funding is being generated from approved mortgage refinancing in 2013 and through the ongoing sale of Toronto Community Housing properties as approved by Council.  At the same time, the Special Housing Working Group recognized that the capital repair backlog was going to grow significantly over time unless further funding measures were identified.

Based on a recent building condition study commissioned by Toronto Community Housing on their social housing portfolio, the consulting group Ameresco has estimated the current TCH capital backlog to be $862 million.  For an aging housing stock with an asset replacement value of some $9 billion this is considered on average a fair and acceptable Facility Condition Index (FCI) – ratio of backlog to asset value.

The average age of the 58,500 units within the TCH portfolio is over 40 years.  With an asset value of $9 billion, maintaining and modernizing TCH's housing stock is a significant challenge. 

Toronto Community Housing 2013-22 Capital Requirements - $2.6 Billion

Given the age of the portfolio and years of deferred capital repairs, Toronto Community Housing is facing a projected $2.6 billion "spike" in capital requirements from 2013 to 2022.  The need for solutions to address the upcoming ten-year capital repair needs is now urgent as the forecasted growth in capital repairs will threaten the ratio of capital backlog to asset value. 

Historically, Toronto Community Housing has operated year to year with capital repair funding from its annual operating budget and has not undertaken a longer term capital and financing plan to solve this significant issue.  Over the past year, City and Toronto Community Housing staff have worked collaboratively to develop a long-term plan that sets out the financial resources Toronto Community Housing will require to properly maintain its housing stock in an acceptable state of repair. 

The Toronto Community Housing Ten-Year Capital Financing Plan, detailed in Appendix A, is designed to finance the 2013-22 capital requirements and create greater certainty for the Board to govern and maintain housing in a safe and good state of repair and provide security to the people who call these buildings home.

Federal, Provincial and Toronto Partnership Funding

The Ten-Year Capital Financing Plan is built upon the principle of a federal, provincial and Toronto partnership, where each order of government will contribute one-third or $864 million each of the funding required by TCH over the next ten years to address the $2.6 billion in new capital repairs.

The federal and provincial governments created the legacy of social housing and it is their duty and social responsibility to renew their partnership.  At a time when more support is required, social housing funding from the other the orders of government is being withdrawn through the cancellation of the provincial Toronto Pooling Compensation grant and the on-going withdrawal of federal funding for social housing.  Yet, given the diversity and depth of their revenue sources, the federal and provincial governments are much better positioned to fund social housing than the City of Toronto.

The Financing Plan provides that the City and Toronto Community Housing will commit to its $864 million share of funding over the next ten years.  Cognizant of current federal and provincial deficit pressures, the Plan defers the matching one-third federal and provincial contributions to 2016 to 2022.  Through intergovernmental advocacy, the City and Toronto Community Housing will continue to work with local, provincial and national housing partners to secure commitments from the federal and provincial governments.  Without on-going commitments from all orders of government, the Toronto Community Housing capital backlog is expected to grow with the portfolio reaching a critical state of repair (i.e. FCI > 30%) by 2020.

Future Toronto Community Housing Sustainability

The adoption of the Ten-Year Capital Financing Plan is intended to provide Toronto Community Housing with a greater level of funding certainty to address the ten-year "spike" in capital repair requirements.  After ten years, from 2023 onward, the Financing Plan assumes TCH will be able to address its capital needs from City and Toronto Community Housing funding sources.

This report recommends that Toronto Community Housing report annually on the status of the capital backlog, the results from prior year expenditures and updates related to estimates for capital need and funding requirements.  The Financing Plan will create sustainability and will ensure accountability through annual reporting to Council while providing opportunities for necessary adjustments and reporting on the outcomes of intergovernmental efforts. 

Overall the Toronto Community Housing Ten-Year Capital Financing Plan demonstrates to the federal and provincial government and other partners that the City is being both aggressive and proactive in maintaining its social housing assets but that the $2.6 billion in capital needs required over the next ten years cannot solely be financed on the City's property tax base.