Item - 2019.EX10.2

The Executive Committee recommends that:

1.  City Council adopt the rent supplement-based funding model, described in Attachment 1 to the report (November 5, 2019) from the Deputy City Manager, Community and Social Services as the new funding model for the Toronto Community Housing Corporation, with funding allocation to be subject to annual review and consideration through the budget process, ensuring that any operational surplus, realized through efficient and effective operational spending, be retained by Toronto Community Housing Corporation and its use be directed by the City through the budget process.

2.  City Council direct the General Manager, Shelter, Support and Housing Administration, working in collaboration with Financial Planning, the future City Housing Corporation Relationship Unit approved by Council in 2019.EX7.1 and Toronto Community Housing, to review the adequacy of the new funding model at regular intervals according to the schedule listed in Table 1 in Attachment 1 to the report (November 5, 2019) from the Deputy City Manager, Community and Social Services.

3.  City Council direct the General Manager, Shelter, Support and Housing Administration to develop an updated Operating Agreement and new accountability mechanisms for Toronto Community Housing Corporation based on the guidelines contained in Attachment 1 to the report (November 5, 2019) from the Deputy City Manager, Community and Social Services.

4.  City Council request the General Manager, Shelter, Support and Housing Administration, in collaboration with the future City Housing Corporation Relationship Unit, to review the City's accountability and oversight resource requirements for Toronto Community Housing Corporation and incorporate any changes into future City operating and capital budgets.

The Executive Director, Social Development, Finance and Administration and the Manager, Tenants First, Social Development, Finance and Administration gave a presentation on Implementing Tenants First - A New Funding Model for Toronto Community Housing.

In February 2018, through the annual budget approval process, City Council approved an interim funding model for Toronto Community Housing Corporation covering the 2018 and 2019 budget years, directing City staff to report on a recommended permanent funding model prior to the 2020 budget process. This report recommends a new, permanent funding model for Toronto Community Housing Corporation.

When Toronto Community Housing Corporation was created in 2002, City Council approved a block subsidy funding model based upon actual operating costs at that point in time. The block funding model was not formally reviewed or updated until 2016 when the Mayor's Task Force on Toronto Community Housing Corporation, in their final report titled "Transformative Change for Toronto Community Housing", highlighted that the funding model was unsustainable and inadequate, and did not provide a sufficient level of funding to allow Toronto Community Housing to manage and maintain safe and good quality homes in a state of good repair. This position was reinforced by an independent review undertaken by City staff, with the support of an external third party financial consultant.

Since the interim funding model was approved, staff from the Tenants First team, Shelter, Support and Housing Administration, and Toronto Community Housing Corporation have developed a recommended permanent funding model based on extensive research and analysis.

Staff are recommending a rent supplement-based model to be implemented for the 2020 budget year establishing a baseline subsidy for annual consideration, comparable to what Toronto Community Housing received through the interim funding model in 2018 and 2019, that will allow the corporation to meet its landlord obligations and maintain its buildings in a state of good repair. In future years, an inflationary cost factor will also be applied to this baseline to calculate the subsidy to be considered.

A rent supplement-based model will provide Toronto Community Housing Corporation with consistent, predictable funding each year as the City's subsidy will cover the difference between the baseline revenue requirement and actual tenant rental payments within Toronto Community Housing's subsidized portfolio. The City subsidy will be used to support both operating and capital costs as follows:

Operating - Supplements revenue generated by the Toronto Community Housing Corporation to fund operational requirements (day-to-day expenses) as well as supporting interest and principle payments on mortgages; and loans such as the Federal Co-Investment program.

Capital - Subject to annual review and Council approval, a portion of the recommended rent supplement-based subsidy, will be directly allocated to Toronto Community Housing's 10-year capital plan and funded through the City's capital budget. It is recommended that $160 million of the rent supplement based subsidy be directed to capital on an annual basis over the 10-year capital plan.

It is critical that Toronto Community Housing Corporation have predictable annual capital funding to plan and execute their capital program. $160 million of annual capital funding from the City, combined with funding secured through the National Housing Strategy, allows Toronto Community Housing Corporation to bring their portfolio to a state of good repair and ensures no units are closed. It is estimated that 25 units would be subject to closure for every $10 million deviation from the proposed capital funding over the next three year.

Council approval will demonstrate to Toronto Community Housing Corporation's residents and other orders of government that the City is committed to operating and maintaining the Toronto Community Housing Corporation housing portfolio. $160 million per year is also the estimated amount required annually, beyond the current 10 year capital plan, to ensure that the buildings continue to be maintained in a state of good repair for all future years.

The recommended funding model follows the guiding principles adopted by City Council in 2018 (see 2018.EX34.3 "Implementing Tenants First - Creating a Seniors Housing Unit at Toronto Community Housing Corporation and Transitioning towards a Seniors Housing and Services Entity at the City") as baseline funding is predictable for Toronto Community Housing Corporation, easy to administer and allows for an inflationary increase. This funding model will also apply to the to-be-established Seniors Housing Corporation, which will operate Toronto Community Housing's seniors-designated portfolio.

The recommended funding model fulfills the City's commitment to adequately fund its Local Housing Corporation. City staff will review the model regularly to ensure its continued relevance, adequacy and potential impacts associated with any annual surpluses or additional funding sources. Additionally, Council will approve Toronto Community Housing Corporation's subsidy on an annual basis through the City's budget process as the subsidy amount will form part of Shelter, Support and Housing Administration's annual budget submission.