In April, I posed the question, “Can we beat the REITs at their own game?” Today we know the answer could be YES – but only if CMHC and municipalities are ready to step up. 

Here’s the background: according to the brilliant housing researcher Steve Pomeroy, Canada lost 322,600 affordable homes between 2011 and 2016. During the same period, only 20,000 affordable homes were built. That means for every affordable home built, Canada lost 15. Some were demolished to make way for higher-priced condominiums. But most disappeared simply because landlords raised the rents above the $750/month maximum that renter households with incomes below $30,000 – including 27.5% of Toronto renters – can afford.

We can’t build our way out of this crisis. CMHC’s National Housing Strategy promises a maximum 150,000 new affordable homes over ten years – fewer than half those lost in five years. But we can act now to preserve the affordable housing we still have, by taking at-risk properties out of the market and into community ownership through non-profit organizations, co-ops and land trusts. 

Learning from past successes

A non-profit Acquisitions Strategy is not a new idea. In Toronto alone, tenants and co-op activists converted 4,500 privately owned rental units into co-op homes. I worked for one of those co-ops. Starting in 1976, Innstead Co-op bought up over 50 houses, duplexes and triplexes in east Toronto, using a process that illustrates in microcosm what we need now.  

CMHC “pre-qualified” Innstead to purchase up to 20 new units each year. Innstead had a real estate agent constantly scouting for properties on its behalf. As soon as a suitable house came on the market, the co-op’s Co-ordinator and Renovations Manager inspected the house, assessed the building condition, developed a scope of work and determined what we could offer. If the project “pencilled,” we made an offer the next day with a 3-week condition on obtaining financing. 

The day after our offer was accepted, we sent our 4-page application form – simply our corporate information, a capital and operating budget, our proposed rents and our list of proposed renovations – to CMHC’s Toronto office. Within two days, CMHC would send a building inspector and appraiser to inspect the property. Within three weeks we would receive CMHC approval for both funding and loan guarantees. Innstead would waive the conditions, and the house was theirs. Renovations began as soon as Innstead had the keys, and the future of the home’s affordability was secured forever. Today, Innstead’s bachelor apartments rent for $647/month and three bedroom houses rent for $1,541/month.

What would we need to make this happen today? 

The Canadian Network of Community Land Trust’s webinar, Beat the REITs, has the answer. 

First, we need a CMHC acquisitions fund. Steve Pomeroy is already on the case. He is proposing CMHC supplement the National Housing Strategy’s Co-Investment Fund – which funds only new construction and non-profit renovations – with an Acquisitions Fund that would enable non-profit, co-op and land trust organizations to purchase at-risk rental buildings when they come on the market. 

Second, we need expedited approvals. CMHC no longer has a Toronto office. But might it be possible for the City of Toronto could step into that role? The City pioneered a Small Sites Acquisition Pilot Program that had many of the same features Innstead enjoyed. Non-profit organizations were pre-qualified, in this case through an RFP process. And in 2019, Parkdale’s Neighbourhood Land Trust was able to tap $1.5 Million in City funds, combined with the land trust’s own equity, Federal/Provincial funding and a conventional mortgage, to purchase and renovate a large at-risk rooming house. 

Alternatively, the Ottawa Community Foundation has contemplated a revolving fund to enable non-profit organization to tie down properties quickly, and then repay the Foundation once they had CMHC approval.

There may also be the potential to identify acquisition sites before they come to market. In the heyday of co-op acquisitions, for example, it was often tenants who first signaled that their building might be on the verge of sale and who organized to take control of their own buildings. 

Third, the non-profit and co-op sector needs the capacity to participate in the market. Like Innstead, we need specialists who can scan the market for opportunities, evaluate building condition and financial viability, submit a credible submission and take on the responsibilities of owning and operating the building. 

Unlike Innstead, however, we will be pursuing far more complicated buildings and competing with buyers in a red-hot market. Some Toronto non-profit housing providers are already collaborating to strengthen their collective development capacity. We may also need to cultivate a development consultant who becomes the acquisitions specialist, or deliberately assemble the combination of resources we need from many parties. 

Ready for something truly audacious?

CMHC has set itself a “big hairy audacious goal: by 2030, everyone in Canada will have a home they can afford and that meets their needs.” By that measure, building-by building purchases will be, in the words of a participant in the Beat the REITs webinar “fighting a nuclear war with a slingshot.” Their proposal: take up CMHC’s call for audacity by buying a REIT! – and then put the REIT’s expertise and assets to work for the community-based sector. 

Keeping at-risk properties affordable forever

An acquisition strategy would bring so many benefits to Toronto. It would:

• enable low-income tenants to stay where they are, stabilizing neighbourhoods, and preserving a diversity of incomes and tenures in gentrifying districts 
• preserve and extend the legacy of public investment. Many of the buildings at risk of financialization were created through federal grants and tax incentives totalling $4 Billion Canada-wide. Bringing these units into the community domain extends the value of these considerable public investments
• be faster and surer than new builds. A recent study of nine Toronto supportive housing proposals found seven required Official Plan and Zoning By-law amendments, and two required minor variances. Only two of the nine went forward. One non-profit owner purchased a property using their own reserves in 2015, yet five years later their new building is only now under construction.

Seizing the moment 

Based on the best information we have, during the Covid crisis 10 to 15% of Ontario renters have not been able to pay their rent. Some will be able to bounce back once they return to work. But many others may find that their old job, and perhaps their entire line of work, has evaporated. 

That’s bad news for tenants who risk losing their homes once the Ontario Government lifts its eviction ban. It’s also bad news for small landlords who needed those rents to stay afloat. And it will be very bad news for Toronto if these at-risk buildings are bought up by REITs and other financialized players whose business model entails squeezing low-income tenants with extra charges, or hustling them out the door and raising the rents to whatever the market will bear.

At its June 15th meeting, Toronto City Council’s Planning & Housing Committee directed the Housing Secretariat and City Planning Division to convene a working group with non-profits, co-ops and land trusts to develop a strategy to acquire properties for affordable housing.

This is not a moment to miss!