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HomeMy WebLinkAboutFIN-2022-158 - Affordable Housing Development Charge DC Waiver PolicyStaff Report Financial Services Department www.kitchener.ca REPORT TO: Finance and Corporate Services Committee DATE OF MEETING: April 4, 2022 SUBMITTED BY: Ryan Hagey, Director of Financial Planning & Reporting, 519-741-2200 ext. 7353 PREPARED BY: Ryan Hagey, Director of Financial Planning & Reporting, 519-741-2200 ext. 7353 Andrew Ramsaroop, Social Planning & Affordable Housing Program Lead, 519-741-220 ext. 7242 WARD(S) INVOLVED: All Wards DATE OF REPORT: March 23, 2022 REPORT NO.: FIN -2022-158 SUBJECT: Affordable Housing Development Charge (DC) Waiver Policy RECOMMENDATION: That financial policy FIN -PLA -XXX "Affordable Housing Development Charges Waiver" be approved (Attachment A to report FIN -2022-158); and That the terms of reference for the Affordable Housing Reserve be approved (Attachment B to report FIN -2022-158). REPORT HIGHLIGHTS: • The purpose of this report is to approve the Affordable Housing Development Charges Waiver policy and confirm the terms of reference for the Affordable Housing reserve. • One-time funding of $2M was set aside during the 2022 budget process for this purpose. Ongoing funding would need to be identified through a future budget. • Community engagement related to the Housing for All affordable housing strategy included multiple stakeholder groups and informed the report recommendations. • This report supports A Caring Community by creating an Affordable Housing Strategy. BACKGROUND: In December 2020, Council endorsed Housing for All as the City's affordable housing strategy. This award-winning strategy was developed through months of dialogue with a community working group made up of members of the public, Council, non-profit, industry representatives and academia. When Council identified Kitchener's first affordable housing strategy, it was very clear that the strategy should identify what the City of Kitchener can do for affordable housing and to not take over the roles and responsibilities of other levels of Government. Through the 2022 budget process Council set aside $2M to be used towards affordable housing, with the understanding that staff would develop a policy and bring it back for approval in early 2022. This report seeks approval of that policy and the earmarked funds. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. Page 45 of 65 REPORT: Housing for All Strategy Housing for All contains 44 actions that advance 7 key priority areas that will help the City of Kitchener realize the right to housing locally and work towards creating more housing opportunities across the housing continuum. One of the 44 actions in Housing for All was to consider the establishment of an Affordable Housing Reserve Fund to support affordable housing initiatives. This action was advanced through the 2022 budget process. Through broad and in-depth engagement with the public, non -profits, and the development industry including those that were a part of the Affordable Housing Strategy Advisory Committee one of the largest barriers to building more community and supportive housing are the capital costs associated with the development process in particular for non-profit housing developers and providers. Providing incentives and fee waivers for community and supportive housing were identified as one way the City and other levels of government could help advance housing opportunities locally. Further, providing financial support is one tool in the municipal toolbox to secure more affordable and supportive housing units locally. Currently, the City provides an exemption from development application fees and building permit fees for eligible non-profit rental projects. Non-profit developers and housing providers have expressed that these fee waivers help remove some of the barriers to development as it allows them to reallocate these funds to other aspects of the project. The uptake on these fee waivers is high thus demonstrating their need and effectiveness of the policy. Provincial legislation around the deferral of DC payments helps spread development costs over a longer period of time, however these fees must be paid and ultimately direct funds away from capital and operating expenses. A DC payment waiver/grant was identified by the Advisory Committee and by the non-profit development community as one way to remove financial barriers to building more affordable and supportive housing units and to advance the City's housing targets. The policy recommended by staff takes this engagement and advice into account, utilizes the financial tools available to a municipality, while ensuring the City remains within its jurisdiction and legislative requirements. Further, it provides the framework for which the $2M of funds within the Affordable Housing Reserve will be used to further Kitchener's affordable housing priorities and ultimately help to develop the much needed affordable and supportive housing units. Policy Staff are recommending the City provide a waiver for 100% of the amount of DCs payable to the City for a non-profit housing development as defined in the Development Charges Act and associated regulation. Some key highlights of the policy include: • The waiver covers 100% of the DCs payable to the City as long as there are funds available in the Affordable Housing reserve fund. When a qualifying development would normally pay their DCs, funds will instead be transferred from the Affordable Housing reserve fund to the Development Charges reserve fund. • The definition of non-profit housing development in the City's policy aligns with the Provincial definition in the DC Act and associated regulation for easy interpretation. Page 46 of 65 • The policy is retroactive to January 1, 2020. The Housing for All strategy was under development throughout the whole year and there were discussions/indications with non- profit housing developers that any waiver policy would be retroactive to developments underway throughout the year. If the proposed policy is approved, any qualifying developments dating back to January 1, 2020 would have their DCs waived or refunded. Staff believe a DC waiver is a sound solution for affordable housing developments because it will remove one of the costs for qualifying developments, is easy to administer, and aligns with one of the 55 recommendations from the Ontario Housing Affordability Task Force. In their report from February 2022, recommendation #33 is to: "Waive development charges on all forms of affordable housing guaranteed to be affordable for 40 years." The City's proposed policy is consistent with the position being advocated for by the Task Force and would allow for an easy transition if the Province were to implement the Task Force's recommendation. Under current Provincial legislation any DC exemption must be funded by the municipality (i.e. through property taxes) and not by increased DCs. It is staff's understanding that if the Task Force's recommendation were implemented by the Province, no contribution from property taxes would be required as it would be a mandatory Provincial legislative waiver, and not a voluntary local waiver. This means that any funds remaining in the Affordable Housing reserve if the Province implements a waiver could be used in some other way to support affordable housing development, or be repurposed based on direction from Council at that time. In developing a policy, staff scanned the practices and policies of other municipalities. The scan revealed there is no consensus solution being deployed in Ontario. The other options considered by staff and why they were not chosen are outlined in the table below. Partial Waiver (as opposed Still requires qualifying developments to pay DCs to the City. to a 100% waiver) These payments are made over 20+ years, so it will be difficult o administer and exposes the City to some risk of non-payment. t Grant, section 107 of the Still requires qualifying developments to pay DCs to the City. Municipal Act These payments are made over 20+ years, so it will be difficult to administer and exposes the City to some risk of non-payment. Exemption through DC Reduced ability to adjust the policy as any change to the Bylaw, section 5 (1).10 of exemption would require passing a new DC bylaw (and going the Development Charges through a DC study update). Act _ Community Improvement Requires Council to adopt Official Plan policies and an Plan (CIP), section 28 of accompanying by-law to designate the CIP area. The Official the Planning Act Plan policies must specify municipal programs and incentives and their eligible works, improvements, buildings or facilities. STRATEGIC PLAN ALIGNMENT: This report supports A Caring Community by creating an Affordable Housing Strategy. Page 47 of 65 FINANCIAL IMPLICATIONS: During the 2022 budget, Council earmarked $2M of one-time seed funding for the Affordable Housing reserve. At current DC rates, this funding would provide a waiver for 190 to 280 qualifying units (depending on where they are built). Council could further extend the impact of this policy by approving an ongoing funding contribution to the Affordable Housing reserve through a future budget process. Any ongoing reserve contribution would be an operating budget impact that would put upward pressure on the tax rate increase. The proposed policy includes retroactive application. Staff's recommendation is for January 1, 2020 and reflects discussions with the non-profit housing developers during the development of the Housing forA/l strategy. Failure to make the policy retroactive would jeopardize the positive relationships built throughout the strategy development. The table below summarizes the recommended date and other options considered by staff in the development of the policy. Jan 1, 2020 Housing For All 3 135 $965,000 strategy underway Dec 14, 2020 Housing For All 2 87 $517,000 strategy approved Apr 11, 2022 Affordable Housing DC 0 0 $0 Waiver policy passed y COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. CONSULT — It is estimated that City staff engaged with close to 500 people in developing the Housing forA/l strategy by methods including: • Advisory Committee workshops and sub -committee meetings • Engage Kitchener surveys • One-on-one stakeholder interviews • Meetings with community groups • Kitchener Market • Social media posts PREVIOUS REPORTS/AUTHORITIES: • DSD -20-214 Housing for All — City of Kitchener Housing Strategy • FIN -2021-62 2022 Final Budget Day APPROVED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services. Justin Readman, General Manager, Development Services ATTACHMENTS: Attachment A — Affordable Housing Development Charges Waiver Policy Attachment B —Affordable Housing Reserve Information Sheet Page 48 of 65 1 Ki R POLICY Policy No: FIN -PLA -XXX Policy Title: AFFORDABLE HOUSING Approval Date: April 11, 2022 DEVELOPMENT CHARGES WAIVER POLICY Reviewed Date: April 2022 Next Review Date: April 2027 Policy Type: COUNCIL Category: Finance Amended: Click here to enter a date. Sub -Category: Financial Planning Author: Ryan Hagey, Director of Replaces: Click here to enter text. Financial Planning & Reporting Repealed: Click here to enter a date. Dept/Div: Financial Services Department Replaced by: Click here to enter text. /Financial Planning & Reporting Related Policies, Procedures and/or Guidelines: Development Charges Act &Related Regulations POLICY PURPOSE: The primary purpose of this policy is to help incent or remove barriers related to the development of non-profit housing development. The policy does this by establishing the parameters by which a waiver for development charges (DCs) would be provided to a qualifying development. 2. DEFINITIONS: City — City of Kitchener. DC/DCA — Development Charges/Development Charges Act. Non -Profit Housing Development — is defined by O. Reg. 454/19, s. 3 (1) and means development of a building or structure intended for use as residential premises by, (a) a corporation to which the Not -for -Profit Corporations Act, 2010 applies, that is in good standing under that Act and whose primary object is to provide housing; 1 of 3 Page 49 of 65 Policy No: FIN -PLA -XXX Policy Title: AFFORDABLE HOUSING DEVELOPMENT CHARGES WAIVER (b) a corporation without share capital to which the Canada Not-for-profit Corporations Act applies, that is in good standing under that Act and whose primary object is to provide housing; or (c) a non-profit housing co-operative that is in good standing under the Co- operative Corporations Act. 3. SCOPE: POLICY APPLIES TO THE FOLLOWING: ❑x All Employees ❑Management ❑Permanent Full -Time Employees ❑Permanent Full -Time Non Union ❑Permanent Full -Time C.U.P.E. 791 ❑Temporary ❑Part -Time Non -Union ❑Student El Permanent Full -Time Union ❑Continuous Part -Time Employees ❑Part -Time Employees ❑Continuous Part -Time Non -Union ❑Continuous Part -Time Union ❑Council E] Local Boards & Advisory Committees ❑Specified Positions Only: This policy applies to external customers who meet the definition of non-profit housing development included in this policy. The DC waivers mentioned in this policy do not apply to for-profit housing development. 4. POLICY CONTENT: The City's DC waiver policy provides the specifics of the City's policy without reiterating most aspects of the DCA itself. The City's policy is meant to be interpreted in accordance and in conjunction with the DCA and the Municipal Act. 1. Policy Application a) DC waivers will be available to non-profit housing development units that have not received funds from the City for other site development costs, whether in-kind or cash (e.g. grants, outstanding loans, donations of property). b) The amount of the waiver will be equal to 100% of the City portion of DCs payable, as long as funds are available in the Affordable Housing reserve fund. c) DC waivers will be funded at the point of occupancy which is when the first instalment of DCs is to be made for non-profit housing developments under 2 of 3 Page 50 of 65 Policy No: FIN -PLA -XXX Policy Title: AFFORDABLE HOUSING DEVELOPMENT CHARGES WAIVER current Provincial legislation. This will result in a transfer from the Affordable Housing reserve fund to the Development Charges reserve fund. 2. Retroactivity a) Upon approval by Council, this policy shall take effect retroactive to January 1, 2020. Any qualifying developments from this timeframe will have their DCs waived at occupancy (if they haven't paid) or refunded (if they have already paid). 5. HISTORY OF POLICY CHANGES Administrative Updates Formal Amendments 3 of 3 Page 51 of 65 Reserve Fund Information Sheet Name of Reserve/Reserve Fund Affordable Housing Category Reserve Fund Type Discretionary Classification Program Specific Purpose Provide funding to support affordable housing development Funding Source - One-time contribution when reserve was created. -Annual contributions approved by Council. - Interest income Appropriation of Funds - Grants to qualifying properties in the amount of City's portion of development charges Target Level Minimum: Closing balance should not drop below zero Rationale: All reserves should maintain a positive balance. Maximum: Closing balance should not exceed $2 million Rationale: closing balance should not exceed initial seed funding. Excess: Excess funding greater than the maximum transfers to the Tax Capital Reserve Fund Next Review: 2027 Reporting -annual report to FCSC Accountability Cost Centre 7022015 Divisional Ownership Equity, Anti -Racism & Indigenous Initiatives Ownership Lead Director of Equity, Anti -Racism & Indigenous Initiatives Interest Allocation Yes Other Previous Policy New Previous Title Not applicable Resolution Date Amendment Date(s): Repeal Date: Proposed start date End Date (if applicable) Not applicable Page 52 of 65