The case of the missing millions

I hope you are all following Social Planning Toronto’s excellent Budget Watch.  That’s how I first heard the alarming news: City staff were proposing a 16.2 per cent cut to Toronto’s Shelter, Support and Housing Budget.

Cost-cutters running amok? Not exactly. But the proposed 2013 Toronto City Budget does point to trouble – trouble that ought to unite ardent housing activists and keep-taxes-low conservatives, Rob Ford and Gord Perks, in one voice.

The 2013 budget breakdown shows $128.4 Million will disappear from the Shelter, Support and Housing Budget. But these missing millions are not City cuts. In fact in some cases they are even cause for celebration.

Take, for example, a property tax break for Toronto Community Housing, accounting for $55.6 M of the “missing millions.” In 2011 City Council recognized many TCHC buildings as “municipal housing capital facilities.” That means next year TCHC will be paying $55.6 M less property tax, and the City will cut its subsidy to TCHC by the same amount.

The good news? This exemption allows TCHC to keep the $6.8 M provincial education portion of the property tax it would have otherwise paid. That’s a real saving for TCHC – one I hope will go straight into their State of Good Repair Fund.

Or look at the Federal Social Housing Renovation and Retrofit Program, marked as a $35.3 M loss. This one-time federal infrastructure investment was designed to help cushion the impact of the 2008 recession. Hundreds of public, non-profit and co-op housing providers used this money to create jobs while repairing their buildings and making them more energy efficient.

No-one expected the program to last forever. The good news is that the Feds made a smart investment – much smarter than the bailouts of car manufacturers, if I’m reading recent news reports correctly. I hope a smart economist is counting up the benefits of this program to demonstrate how Federal investments can score wins for both housing and the economy.

Are there any real cuts?

I’m not a budget expert, and there may be cuts lurking that I can’t spot. But I was reassured to see that the City planned to maintain most service levels for social housing and homelessness. Two causes for concern:

• $100,000 less for Supports to Daily Living. That’s the money used to support previously homeless tenants in alternative housing, including many stand-alone houses. Any cuts here would be bad news for tenants and their neighbours.
• Provincial cuts to social assistance and services for homeless people. I’m not an expert in these cuts, but I understand from the Wellesley Institute the City will be trying to patch the gap this year while working to reinstate this funding. You can read more about the issue here.

The real trouble

When social housing was downloaded in 2001, municipalities and housing activists warned there would be trouble down the road. That trouble is now upon us.

Over the past ten years the cost of heating, insuring and maintaining housing has risen. But incomes, and especially the incomes of people who live in social housing, have not kept pace.

Who is responsible for bridging the gap? The City of Toronto.

Provincial legislation requires municipalities to fund cost increases and pay for increases in rent-geared-to-income subsidies – and thank goodness it does. Without this protection, we might have seen housing budgets raided to pay for tax cuts or any number of pet projects.

The City gets squeezed. Feds pocket the savings.

Until now, the City has had a reserve fund to help pay for these rising costs. But in 2013, the City will be withdrawing the last $26 M left in these reserves. By 2017, City staff predict Toronto’s housing budget will fall $76 M short, and Toronto taxpayers will be picking up the tab.

While Toronto gets stuck with the costs that rise, senior governments are walking away with money in their pockets. The Federal Government’s chief contribution to social housing has been mortgage subsidies. These subsidies have been much lower than the federal government bargained for. In the 1980s, when most social housing was developed, interest rates climbed to 20%. When interest rates dropped to today’s levels, the Feds reaped the benefit.

Now these mortgages are being paid off. City staff project the Federal Government will withdraw $33.4 M net annually from Toronto’s social housing by 2017, increasing to $100 M by 2020.

Harper’s chance to be a housing hero

The Federal Government now has a once-in-a-generation chance to be a housing hero, without raising taxes or increasing the deficit.

Social housing was built when land and labour were cheap. For the most part it is much cheaper to maintain this housing than replace it. Cheap, but not free. After 30 years or so buildings need new investment. What does the prudent owner do after the mortgage expires? Protect his investment by keeping the home in good repair.

And that’s what the Federal government should do: take the money it no longer is paying to the bank and re-invest it in social housing.

We’re on the same side

In their budget recommendations, City staff are urging City Council to request the Federal government to reinvest its savings in social housing. It’s a message Council has heard before. But until now, its voice has been muted.

This year Toronto empties its housing reserves, with only property taxes to meet its legislated housing obligations. If ever there was a time that City Council and housing activists to be on the same side, this is it.

Let’s work together to truly turn the Federal government into the wise investor it says it is. Now’s the moment!