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HomeMy WebLinkAboutDSD-2024-143 - Not For Profit Affordable Rental and Co-op Housing Incentive (Pilot) REPORT TO: Community and Infrastructure Services Committee DATE OF MEETING: April 22, 2024 SUBMITTED BY: Rosa Bustamante, Director of Planning & Housing Policy, 519-741- 2200 ext. 7319 PREPARED BY: Tanya Roberts, Project Manager (Planning), 519-741-2200 ext. 7704 Janine Oosterveld, Manager of Customer Experience & Project Management, 519-741-2200 ext. 7076 WARD(S) INVOLVED: All Wards DATE OF REPORT: March 12, 2024 REPORT NO.: DSD-2024-143 SUBJECT: Not-For-Profit Affordable Rental & Co-op Housing Incentive (Pilot) RECOMMENDATION: That a new Council Policy regarding Not-For-Profit Affordable Rental & Co-op Housing Incentives (Pilot), attached to Report DSD-2024-143 as Appendix A, be approved; and, That the reallocation of Affordable Housing Reserve funds, to be used towards the Not-For-Profit Affordable Rental & Co-op Housing Incentives (Pilot), be approved; and, That the General Manager of Development Services or their designate be authorized to execute all agreements and other related documentation, subject to the satisfaction of the City Solicitor, which may be required to administer the Not-For- Profit Affordable Rental & Co-op Housing Incentives (Pilot). REPORT HIGHLIGHTS: The purpose of this report is to establish a new Council Policy and to allocate sufficient funds to implement the Not-For-Profit Affordable Rental & Co-op Housing Incentive (pilot) program to incentivize up to 520 new not-for-profit supportive and affordable units in Kitchener. The key finding of this report is that upfront funding is a barrier for some not-for-profit affordable housing projects and that seed funding worth $10,000 per unit would help advance projects to a state that positions them for other critical capital funding. The financial implications are that $1.3M from the Affordable Housing Reserve will be used to leverage $3.9M of Housing Accelerator Funds from the Federal Government. Community engagement included interviews with key stakeholders including not-for- profit and co-operative housing providers, development consultants who support these *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. projects along with CMHC and Region of Waterloo staff involved with funding for affordable housing projects to determine the approach to program development and implementation. This report supports Building a Connected City Together by focusing on housing and ensuring secure, affordable homes. BACKGROUND: In November 2023, City of Kitchener announced a partnership with the federal government to fast track the construction of new homes. Through the Housing Accelerator Fund (HAF), the Federal government will provide $42.4 million to the City of Kitchener to enable the City to develop new programs and initiatives to accelerate housing starts. One of these new initiatives is the Not-For-Profit Affordable Rental & Co-op Housing Incentive (pilot). The Not- For-Profit Affordable Rental & Co-op Housing Incentive is a pilot program designed to remove upfront financial barriers from the creation of new affordable housing units by providing a $10,000/unit grant for qualifying developments to incentivize 520 new units with a commitment to 260 units with building permits issued by September 1, 2026. The City currently incentivizes affordable housing through the Affordable Rental Housing Incentive which waives planning and building application fees. In addition to this, a concierge Road, then formally established in 2021 to help navigate affordable housing projects through the approvals process. This program supports the Housing for All Strategy, approved in December 2020, and specifically supports priority 4, which focuses on helping to secure community, affordable rental, and affordable home ownership housing. It also implements Priority 5 through applying for and receiving federal funding through the HAF for affordable housing. Housing for All Implementation is one of 11 strategies and actions to support the building of 35,000 Council in March 2023. REPORT: The objective of this report is to establish the Not-For-Profit Affordable Rental & Co-op Housing incentive pilot program to assist with the predevelopment costs of building new not- for-profit affordable rental and co-operative housing units. The intention of the program is to help cover up-front (non-capital) costs involved in advancing projects towards shovel-ready construction. Upfront costs related to design and City approvals have been identified by affordable housing developers as a significant financial barrier to beginning projects. Through this report, staff recommend a grant program that provides $10,000 per unit up to a maximum of 50 units ($500,000/project) to be distributed incrementally at key milestones, as outlined in the proposed policy in Appendix A. The general parameters of the program include: $10,000/unit up to a maximum of 50 units ($500,000/project) Grant funding to be forwarded based on an incremental staged approach following project milestones: o E.g., Pre-submission Consultation, Conditional Site Plan Approval, Site Plan Approval, Building Permit issuance. Total funding of $5.2M for this pilot program will come from: Federal Housing Accelerator Fund ($3.9M) City Affordable Housing Reserve Fund ($1.3M) Discussion about each of the funding sources is provided below. Re-allocation of Housing Reserve Fund One of the actions was to establish an Affordable Housing Reserve Fund to support affordable housing initiatives. This reserve was established in 2021 and has been used to provide financial relief from paying development charges. Changes made through Bill 23, More Homes Built Faster Act, mean that qualifying affordable housing developments are now exempt from paying development charges. Based on this, staff is seeking to repurpose the $1.3M in the Affordable Housing Reserve to support the proposed pilot program outlined in this report. Utilizing HAF Funds for Affordable Housing The program was initially conceived to include $1.3M of HAF funds, to be paired with a matching grant of $1.3M City funds to provide $5,000 per unit that would incentivize up to 520 new affordable units. To boost the per unit incentive to $10,000, additional HAF funds are intended to be re- allocated to this program. Should this funding model require any changes in the future, staff will report back to Council. Program Development Purpose. Through consultation, affordable housing providers encouraged the City to advance a $10,000/unit incentive, which would go a long way to support front-end costs before larger capital funding through CMHC, the Province, or private donors can become available. These funds are not intended to be used for capital costs, but for early upfront costs which can help to advance a project beyond conception to a shovel-ready state. Getting to this stage is a requirement for other provincial and federal funding programs that provide core capital/construction costs. These incentives would be used for design and approval costs which are not exempt or provided in-kind and are often challenging to secure. Incentive format. To determine the form of incentive, staff considered a full grant and a combination of no-interest loan and a grant. Through consultations, some of the recurring concerns with a loan program included the additional costs and administration involved with processing and securing the loan, both for the housing provider and the City. In addition, the risk of using the loan money to determine if a project is feasible posed a challenge. If a project was determined to be unfeasible, the loan repayment would become a challenge for the housing provider to repay. Feedback from some stakeholders identified other funding preferences over a loan, such as accessing existing equity or lines of credit. All stakeholders expressed a preference of a grant versus a loan. Through this evaluation, it is recommended that the incentive program is established fully as a grant program to remove barriers to accessing funding, with the goal of advancing affordable units to construction quicker. Navigating Risk. It was also identified that although these new incentives will provide much needed funding and fill current funding gaps for getting a project off the ground, there is still some risk that this funding alone cannot guarantee that a project will advance to a shovel ready state and progress to construction. For example, some stakeholders identified that they were shovel ready, yet lacked enough capital/operations funding to progress to construction and were stuck. It was also identified that mixed rents are the most financially feasible and that some projects are unlikely to include only affordable units, as many stakeholders identified the challenges in its operationally sustainability. Staff are aware that there may be a percentage of projects that do not progress to a state of being shovel ready and are therefore recommending that the incentives created through this grant be distributed in stages, as outlined in Appendix A. This pilot will run during the period of the HAF program, and the City will evaluate the continued implementation of this type of an incentives program depending on the uptake and success during the HAF program. HAF dollars would represent 75% of the total funding for this program, and when immediate impact on the delivery of affordable housing. Policy Administration Once approved, staff will develop administrative procedures, including: Application form, including requirements for supporting documentation to confirm eligibility; Legal agreement process; and Internal procedures for staff review and approval of requested forms received and funds released and tracking progress for the program. Conclusion The Not-For-Profit Affordable Rental and Co-op Housing incentive pilot program is intended to help break down front-end barriers to starting an affordable housing development project and will support the creation of up to 520 new affordable units, helping the City to achieve its goal of building 1200 new units in the next 3 years. The proposed program supports the Housing for All strategy through an innovative incentive program that aims to build more affordable housing quicker. Staff recommend that Council endorse the recommendations outlined in report DSD-2024-143. STRATEGIC PLAN ALIGNMENT: This report supports Building a Connected City Together: Focuses on neighbourhoods; housing and ensuring secure, affordable homes; getting around easily, sustainably and safely to the places and spaces that matter. Policy No: Click here to enter text. POLICY Approval Date: Click here to enter a Policy Title: Not-For-Profit Affordable date. Rental & Co-op Housing Incentive Reviewed Date: Click here to enter text. Policy Type: COUNCIL Next Review Date: Click here to enter text. Category: Finance Reviewed Date: Click here to enter text. Sub-Category: Grants, Rebates & Incentives Last Amended: Click here to enter a date. Author: Project Manager (Planning) Replaces: Click here to enter text. Dept/Div: Planning & Housing Policy Repealed: Click here to enter a date. Replaced by: Click here to enter text. Related Policies, Procedures and/or Guidelines: None. 1. POLICY PURPOSE: To establish a policy that outlines the parameters for a pilot incentive program that encourages the development of new not-for-profit affordable rental and co- operative housing units in the form of a grant that covers non-capital upfront costs associated with removing barriers to advancing a project from idea to shovel- ready. 2. DEFINITIONS: Affordable Dwelling Units for the purpose of this Policy, means: a) a unit for which the rent or housing co-op monthly charges (similar to rent) does not exceed 30 percent of the gross annual household income for low and moderate income households; or, b) a unit for which the rent or housing co-op monthly charges (similar to rent) is at or below the average market rent of a unit in the Regional market area. 1 of 5 Policy No: Policy Title: Not-For-Profit Affordable Rental & Co-op Housing Incentive Non-Profit Housing Developer for the purpose of this Policy, means: a) a corporation to which the Not-for-Profit Corporations Act, 2010 applies, that is in good standing under that Act and whose primary objective is to provide housing; 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 objective is to provide housing; c) a non-profit housing co-operative that is in good standing under the Co- operative Corporations Act; or, d) an organization that is a registered charity within the meaning of the Income Tax Act (Canada) or a non-profit organization exempt from tax under paragraph 149 (1) (l) of that Act, and whose land is owned by the organization, all or part of which is to be used as affordable housing. Supportive Housing that focuses on rehabilitation and community integration. They are generally operated by non-profit agencies and staff are composed of individuals trained in social work or psychiatric rehabilitation. 3. SCOPE: POLICY APPLIES TO THE FOLLOWING: All Employees All Full-Time Employees All Union Management C.U.P.E. 68 Civic Non Union C.U.P.E. 68 Mechanics Temporary C.U.P.E. 791 Student I.B.E.W. 636 Part-Time Employees K.P.F.F.A. Specified Positions only: Other: Council Local Boards & Advisory Committees This Policy applies to all staff that coordinate the incentives program, process development applications and building permits. 4. POLICY CONTENT: 4.1 Eligibility Criteria In order to be eligible for this Policy, the following criteria must be met: 2 of 5 Policy No: Policy Title: Not-For-Profit Affordable Rental & Co-op Housing Incentive a) The applicant must meet the definition of a Non-Profit Housing Developer. b) Incentives only apply to the creation of new Affordable Dwelling Units. c) Primary use of the qualifying dwelling units must be residential. d) Eligible projects are those that are in the early stages of ideation or concept development through building permit review. Projects with a building permit issued for the proposed new units are not eligible for the program. e) Eligible projects may include a for-profit development where a portion of units are Affordable Dwelling Units that are managed and operated by a Non-Profit Housing Developer. Funding would only be available for the affordable dwelling units. f) Eligible units must maintain affordability for a duration of 25 years. g) Proof of ownership or legal right to develop on lands. h) The subject property shall not be in a position of tax arrears. 4.2 Grant Framework a) The amount of the grant will be equal to and no greater than $10,000/unit up to a maximum of 50 affordable dwelling units per project (maximum grant of $500,000). b) Grant funding must be used for non-capital up-front costs related to development and approvals. c) Funding will be distributed at key milestones of the project, including but not limited to Pre-submission Consultation, Site Plan Application Submission, Conditional Site Plan Approval, Site Plan Approval, and Building Permit Issuance, as developed by City staff. 4.3 Policy Application a) Non-Profit Housing Developer to submit a complete application to the Director of Planning & Housing Policy. The City will not charge a fee to process the application. 3 of 5 Policy No: Policy Title: Not-For-Profit Affordable Rental & Co-op Housing Incentive b) The application will be reviewed by City staff to confirm criteria within this Policy are met, and Non-Profit Housing Developer advised of the result. Should there be any issues or conflicts between the complete application and the criteria within this policy, final determination will be made by the Director of Planning & Housing Policy in consultation with the City Solicitor and any other affected business units. c) If approved, the Non-Profit Housing Developer must enter an agreement prior to the release of funding. The agreement will include: I. The amount of grant awarded II. Grant payment milestones and milestone criteria III. Terms of the grant funding IV. Other clauses as deemed necessary by the City Solicitor. d) Upon approval by Council, this Policy shall apply to affordable dwelling units from initial idea to those working towards building permit issuance. Priority may be given to projects that include deeply affordable rental units, and/or supportive housing units e) The agreement will be executed once it has been signed by the Non-Profit Housing Developer. f) If any part of a development to which this policy applies is changed so that the development does not proceed or no longer consists of affordable dwelling units within the 25 years of initial occupancy, this may trigger full or partial repayment of the grant, at the discretion of the City. g) For developments that contain for-profit and affordable dwelling units, the grant will only apply to the affordable dwelling units where the Non-Profit Housing Developer is a partner in the project. The Non-Profit Housing Developer would need to have a signed agreement with the for-profit developer that clearly outlines the terms of the agreement and that those units will be operated by the Non-Profit Housing Developer for a duration of 25 years. h) The decision to award a grant is at the sole discretion of the City of Kitchener and subject to funding availability. 4.4 Program Expectations a) Projects must make timely progress to receive a building permit by September 1, 2026. 4 of 5 Policy No: Policy Title: Not-For-Profit Affordable Rental & Co-op Housing Incentive b) Grant funding may be adjusted as unit counts are finalized through detailed design, at the discretion of the City. 4.5 Effective Date a) This Policy comes into effect on May 1, 2024. b) This Policy will be reviewed no later than 5 years after the effective date. 5. HISTORY OF POLICY CHANGES Administrative Updates No administrative history to date. Formal Amendments No amendments history to date. 5 of 5