Privatization? How about non-profitization?

Is there a way the City can get “out of the housing business” – as many conservatives say  it should — without selling off buildings or selling out tenants?

It’s hard to imagine. We are already seeing the distress of the 700+ Toronto Community Housing families who have been told their houses will be sold to the highest bidder. As one tenant said, it is like “living on quicksand.”

But what if there was a way to privatize without tears? What if  you could release the City from its responsibilities and make tenants’ lives better?

Perhaps the answer is “non-profitization” – an idea inspired by the UK experience.

From 1988 to 2008, over 1.3 million UK homes were transferred from the control of municipal governments to private, non-profit housing associations. (This is not the same as Margaret Thatcher’s well-known “Right to Buy” policy, where individual council houses were sold to the people who live there. That’s an interesting story, but not today’s topic.)

The motives behind these stock transfers, as they are called in the UK, were frankly financial.  In the UK, municipal debt appears on the national balance sheet. The government could clear that debt simply by transferring it to private hands.

The government also wanted to bring in private investment. The UK’s public housing, like Canada’s, had a massive capital backlog and long waiting lists. Stock transfers enabled independent housing associations, with powers that municipal organizations lacked, to marshal private investments worth 19.3 billion pounds.

Tenants decide

Stock transfers may have been designed to solve the government’s financial woes, but they weren’t foisted on tenants. Instead, tenants decided through a referendum whether they wanted to stay under municipal ownership or go with a non-profit landlord.

That meant prospective non-profit landlords had to woo tenant support. They put together “transfer packages” promising to repair and modernize units, control rents and increase tenant involvement.

The national government also kicked in a crucial sweetener. In return for extracting itself from the liability of owning and maintaining housing, it was willing to put up money for capital repairs for any housing transferred to a non-profit association.

Promises kept

Were the campaign promises forgotten or ignored once tenants had cast their vote? Apparently not.

A 2009 study, Hal Pawson et al’s Impacts of Housing Stock Transfers in Urban Britain, tested whether non-profit housing associations had fulfilled the promises they made to tenants.

They found that almost all transfer promises were met on schedule, and many were exceeded. Look at the report’s findings on 47 stock transfers – mostly large urban housing with capital repair backlogs and “socially deprived” tenants — between 1998 – 2008: 29% of non-profit associations exceeded their promises on catch-up repairs; 47% exceeded promises on property modernization; 38% exceeded promises on enhanced tenant participation; and 41% exceeded their promises for new development.

Overall the study found that transferred properties enjoyed:

• Building upgrades that were “appreciably superior” to the UK’s Decent Home Standard
• Increased tenant involvement in organizational decision-making
• A “less hierarchical, more inclusive and more customer-focused corporate ethos”
• Increased social and economic renewal.

A better place to work

Transferred housing also became a better place to work. Privatization is usually seen as bad news for employees. Yet Pawson’s study found that most staff thrived in the independent culture offered by housing associations.

Although housing associations were required to recruit senior staff through a competitive process, most hired back housing department managers and council workers. Unions also reported they were better off in the new regime, citing better communication and more trusting relations with management.

Altogether the study found the non-profit housing associations offered:

• Less hierarchy and better communication between management and staff
• A more inclusive, bottom-up culture, with greater opportunities for creative thinking
• Greater budget responsibilities delegated to middle and junior managers
• A more trusting relationship between managers and staff.

Now the UK’s new Conservative government is going one step further. It is floating the idea of “mutualization,” where tenants, staff and neighbours become share-holders in the corporation. (Their inspiration is member-controlled businesses such as the John Lewis store chain. In Canada, the equivalent might be Mountain Equipment Co-op.)

Would it work here?

It already does. Ontario already has a vibrant 83,000 unit-strong private non-profit housing sector with tenants who, as far as I can see, are as happy or happier than those that live in TCHC. (1) Certainly they do not seem to hit the news as often, but perhaps that’s because their homes are not the political football that TCHC has become.

I also see a world of difference between scattered houses operated by TCHC and those managed by co-op and private non-profit organizations. The co-op and non-profit houses are in better repair, better used, cheaper to operate, receive fewer complaints from neighbours and have money in the bank.

Is changing ownership the answer? Would Toronto Community Housing tenants be better off in independent non-profit housing? To be honest, I’m not sure.  I would certainly love to see TCHC tenants or staff make the counter-argument, and demonstrate why city ownership makes their lives better.

In fact, I’d love to see a wide-ranging debate about “non-profitization:” Would it make tenants’ lives better? Reduce costs? Bring in investment? Enable staff to do their best work?

At a time when Toronto is contemplating losing 700+ affordable units and asking tenants to give up their homes, can we afford not to ask these questions?

(1) The Ontario Government has recently approved a Long-Term Affordable Housing Strategy that will require all public and non-profit housing to conduct tenant satisfaction surveys, so we may soon know where, in fact, tenants are happiest.