Affordable housing funding gap ‘perplexing problem’: mayor

City officials aim to find a way to close a multimillion-dollar funding gap that a coalition of Hamilton non-profits warns is putting 19 affordable-housing projects at risk.

But finance staff say the task of filling the void faces more than one legislative hurdle and threatens to strain municipal coffers.

That's a perplexing problem," Mayor Fred Eisenberger said Friday, calling the problem a form of downloading" from upper levels of government.

This is an expense that's going to land on local taxpayers," Eisenberger said.

The non-profit providers say their projects - or 1,434 affordable units over three years - can't move forward without a break on city development charges.

Moreover, without that $40-million contribution, they can't qualify for federal co-investment funding to realize their $664-million worth of development.

These units will positively impact the housing crisis facing our community," Tricia Lewis, director of operations for Hamilton East Kiwanis Non-Profit Homes Inc., told councillors this week.

But the upfront commitment" from the city is critical" for the viability of the projects, Lewis said.

Kiwanis is a part of Hamilton is Home, a coalition of eight non-profit and charitable housing providers that joined forces in 2020 with the goal of building 3,000 affordable units in three years.

But the rub is a bylaw that doesn't allow exemptions from development charges if applicants tap into provincial and federal programs that specifically cover those fees as eligible expenses.

Development charges are meant to cover the cost of growth by providing funds to build infrastructure, such as water and sewer pipes, required to service new construction.

But under provincial legislation, municipalities must make up for forgone fee revenue through tax- and rate-generated funds.

Kiwanis has formed a limited partnership with Victoria Park Community Homes for a 266-unit affordable-housing project at 60 Caledon Ave. on the central Mountain.

In 2020, the partners teamed up to buy the seven-acre former high school site from the city with the help of a $5-million forgivable municipal loan.

There has been other city help, including a $2-million break on parkland fees, but it's not enough for the Canada Mortgage and Housing Corporation (CMHC), says Lori-Anne Gagne, CEO of Victoria Park.

So without the equivalent of an $8.3-million break in development charges, the non-profits can't capitalize on a plan to secure roughly $20 million in upper-level government assistance, Gagne says.

Even with that exemption, the Caledon Community Collaborative plans to contribute $97.7 million toward the $133-million development.

I'm here to say my hand is out. We need those development charges waived to the tune of just over $8 million," Gagne told councillors this week.

It's not clear, however, what solution staff will find, despite direction from council to investigate options and report back next month.

It's unfortunate" that the 19 projects are now in jeopardy, Coun. John-Paul Danko said Friday.

It's a very significant amount of housing and also funding that's required," said Danko, whose Ward 8 includes 60 Caledon Ave., which received a rezoning approval this week.

Nevertheless, he noted, the property taxes the projects will generate if they're brought to fruition will be far in excess" of their nearly $40 million in exemptions.

City politicians didn't realize the potential ramifications" of changes they made to the bylaw in 2019, Coun. Tom Jackson acknowledged.

There's the huge crossroads before us," said Jackson, referring to the multimillion-dollar fix.

The bylaw was tightened up to target" affordable-housing providers that weren't able to line up development-charge relief through upper-level government programs, Mike Zegarac, general manager of finance, told The Spectator.

That review wasn't just for affordable housing, but across the board, amid a financial crunch spurred by mounting exemptions.

The city has accumulated a $60-million development-charge liability and, in 2022 alone, expects to recover roughly $19 million worth of breaks, Zegarac said.

I just wanted to manage expectations," he told council Friday, adding exemptions must be recovered dollar for dollar."

Allowing for more breaks is just going to represent a greater challenge" for local finances, Zegarac advised.

Changing the development charge bylaw would require an involved background study and public consultation, under provincial legislation, he said in an interview.

So it's not the most nimble tool," he said, noting provincial and federal governments are better positioned to fund housing.

Coun. Brenda Johnson expressed frustration over other levels of government making up the rules" and hamstringing affordable-housing projects in the process.

Development charges threaten a 100-unit affordable-housing development for seniors in Binbrook, she said. It's going to be, flush it down the toilet."

Eisenberger, meanwhile, urged caution about additional development-charge breaks, calling them a very, very slippery slope" amid infrastructure challenges.

In the meantime, finance and housing staff are working on a funding program for affordable housing providers that was meant to compensate for the 2019 bylaw tweak but was delayed in part by COVID-19 pandemic.

So we just need to revisit some of that work that was initiated in 2019," Zegarac said.

Teviah Moro is a reporter at The Spectator. tmoro@thespec.com