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How do housing subsidies work?

Most social housing receives two types of subsidy:

  • Capital subsidies
  • Rent-geared-to-income subsidies

Capital subsidies and other financing tools have made it possible to create affordable housing when the private market was unable to do so on its own (either because rental housing construction is not economically feasible, or because other investments, such as condos, were seen as more lucrative).

Most of Toronto’s social housing was made possible through one or more of the following:

  • Mortgage insurance, that allows social housing to get 100% financing (no downpayment) from the private market
  • Direct lending from CMHC
  • Seed funding and pre-development funding (grants and loans)
  • Renovation grants or loans
  • Capital grants
  • Mortgage interest write-downs (from market interest rates to 2%).

Many subsidies and incentives have been available to private developers as well.

The overwhelming majority of these funds has come from the federal or provincial government. The City’s contribution to affordable housing has usually taken the form of free or low-cost land; waived or deferred development fees and charges; or waived property taxes.

Rent-geared-to-income (RGI) subsidies bridge the gap between 30% of a household’s gross income (with income adjusted through income tax-like calculations) and (depending on when the housing was built) either the actual cost of operating the unit or the low end of the rental market.

The City of Toronto funds RGI subsidies at TCHC and some non-profit and co-op housing providers. Among other housing providers, RGI subsidy comes from the federal government or provincial health and community service ministries. Ontario is the only province where municipalities fund RGI subsidies.

RGI subsidies are attached to social housing, not to individual tenants. They can be transferred freely within a building, and with the City’s permission among social housing units. But tenants who leave social housing cannot take their subsidy with them. And the City of Toronto cannot reduce the overall number of RGI-subsidized units without the permission of the Province.

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