Foreword
Homelessness is a Toronto crisis that requires the attention of every level of government. The Toronto Board of Trade is concerned about the increase in the number of homeless persons in Toronto in the last five to ten years and what it means for the quality of life in our city. The increase in homelessness is a signal to the business community that a growing number of people are not able to participate in the economic growth of the city and the province, and are socially isolated from the community around them. The Board believes that every person should have the opportunity to lead a productive life, have hope for the future and participate in the economic and social fabric of their community.
For Toronto’s business community, homelessness affects the size of our productive and motivated workforce. It has an impact on tourism and business, particularly the retail sector. Unless it is addressed, homelessness will reduce Toronto’s global competitiveness. Other cities understand this reality, and are addressing the problem by investing in their social and physical infrastructure. Toronto must do the same.
While there are many factors that contribute to homelessness, The Board believes there is a direct relationship between homelessness and the shortage of affordable housing. Approximately 45 percent of tenant households in Toronto are paying more than 30 percent of their income on rent, compared to 33 percent in 1990. The proportion of tenants paying more that 50 percent of their income on rent has grown from 15 percent to 23 percent. Combined with a vacancy rate of approximately 2 percent, the need for more affordable housing in Toronto is obvious.
The Toronto Board of Trade’s mission statement is "Building a better community through business leadership". In keeping with this commitment, The Board formed a Quality of Life Task Force in the spring of 1999, with the goal of responding to issues related to homelessness. The Task Force met during the year to generate the recommendations outlined in this report. Toronto businesspersons and professionals from different sectors, including retail, hotel and rental housing management, participated on the Task Force.
This report provides a snapshot of the homelessness issue in Toronto, and the connection between homelessness and the lack of affordable housing. The report is not an exhaustive study of homelessness. Rather, it makes recommendations that, if implemented, would help to address the shortage of affordable housing and ultimately help to alleviate homelessness.
The Toronto Board is committed to social and physical infrastructure development that supports individuals, communities and businesses in providing for a livable society and a strong, productive and growing economy. This report focuses on the homelessness and affordable housing component of our social infrastructure.
The report is also linked to our advocacy work to improve Toronto's physical infrastructure and property tax system. Our property tax efforts are designed to address the tax inequity faced by multi-residential ratepayers. More than half of Toronto residents are renters.
The report offers suggestions and solutions from the perspective of the business community in addressing issues related to homelessness. The Toronto Board of Trade believes that all levels of government must take the lead in addressing homelessness and the social and health factors that contribute to it. Our objective is to promote further discussion among all three levels of government, social service agencies and the business community and propel them to work together to develop a co-ordinated national housing strategy. Recognizing that the business community is already taking a leadership role in helping to alleviate homelessness, The Board also encourages businesses to expand the breadth of their contribution in the future.
Homelessness in Toronto: A Snapshot
Over the last ten years, homelessness in Toronto has been on the rise. This escalation coincides with, and results from, a lack of new rental construction, a decline in vacancy rates and an increase in the number of low income, at risk1 tenants facing homelessness. It is also no coincidence that during this period both the federal and provincial governments, in 1993 and 1995 respectively, withdrew from social housing. Between 1994 and 1998, the private sector constructed an average of only 120 rental units each year (or 3% of all completions).2
Who is homeless in Toronto?
There are no accurate figures on the number of homeless people in Toronto. However, in researching the nature and extent of the problem, the Mayor's Homelessness Action Task Force3 examined the data relating to hostel use and found that:
- Almost 26,000 different individuals used hostels in Toronto in 1996. Over the nine years from 1988 to 1996, about 170,000 different individuals sought shelter in Toronto’s hostels.
- 71 percent of hostel users are male; 29 percent are female. In 1996, families represented 46 percent of hostel users in Toronto. The fastest-growing users of hostels are youth under 18 and families with children.
- The percentage of households in the hostel system headed by women is rising, from 24 percent in 1988 to 37 percent in 1996.
- Nineteen percent of the homeless population, or 5,300 people in total, were children.
- Between 30 and 35 percent of the homeless population, on average, suffers from severe mental illness. The estimates are higher for some population groups; 75 percent of homeless single women, for example, have mental health problems.
- About 75 percent of hostel users treat shelters as transitional housing rather than as an emergency measure.
- At least 47 percent of hostel users come from outside Toronto.
Who is at risk of becoming homeless in Toronto?
The number of persons at risk of becoming homeless can be estimated by examining the social housing waiting list. Recent research4 suggests that most applicants are on the list because they cannot afford private rental housing. In June 1998, more than 37,000 households, representing about 100,000 people, were waiting for social housing in Toronto. This included 16,000 applicants who have children more than 31,000 children. Those on the social housing waiting list tend to fall into three broad categories: seniors; low-wage people experiencing a shortfall in earnings; and those who are homeless or have special needs. Among this latter group are many people receiving social assistance.5
Causes of homelessness
The shortage of affordable housing is only one of several factors contributing to homelessness. Other causes include low income, unemployment and underemployment, drug and alcohol addiction, poor mental and physical health, disabilities, physical abuse and sexual abuse. In many cases, the persons and families affected require much more than housing; they also need flexible support services, adapted to their special needs.
The problem of homelessness exists in a continuum that includes both the chronically homeless and those at risk of losing stable housing. Homelessness and affordable housing are linked. The shortage of affordable housing6 often creates a downward spiral in which individuals and families slip from secure housing to an "at risk" state where they face the loss of their homes and the loss of stability in their lives.
Stable housing is pivotal to resolving this problem. Support services are more effective in an environment of stable housing, where it is easier to service and monitor people’s needs consistently. Stable housing is a critical first step which will allow people who are receiving services and are in a perpetual state of movement and uncertainty to focus on productive activities, such as working, finding a job or caring for family members.
| Recommendation 1: |
| Government programs to assist the homeless must address both the direct and underlying systemic causes of homelessness and focus on the specific needs of the individuals and families they seek to help. |
Creating Affordable Housing
Government Must Take the Lead on Housing Issues
All levels of government must take a leadership role in developing programs that address both the direct and indirect causes of homelessness. The federal and provincial governments have a longstanding tradition of providing housing for city residents. In fact, much of the rental housing in Toronto was built by or under the auspices of the provincial or federal government, and many programs were highly successful. The Toronto Board of Trade believes that governments must resume their responsibility in this area.
Cities like Toronto need this continued public sector support to maintain affordable and supportive housing. It is estimated that, under the current system, the city falls behind its housing requirements by approximately five thousand units each year.7
Municipal Government Cannot Do It Alone
Homelessness and the shortage of affordable housing are not solely municipal issues. The City of Toronto, with its limited tax base and resources, is unable to adequately fund housing initiatives and support services by itself. Forty-seven percent of all shelter users come from outside Toronto and 14% come from outside the country.8 Downloading responsibility for these issues to municipal governments, even if partial funding is attached, will not work. The federal and provincial governments must remain involved, doing their part and sharing in the cost of housing and support services.
In 1999, the estimated total government spending on social housing in Toronto was $492 million.9 To properly address homelessness in Toronto, the City of Toronto has endorsed the recommendations in the Mayor’s Homelessness Action Task Force Report (the "Golden Report"). The Golden Report has estimated that the combined additional cost to all levels of government to implement the major recommendations relating to housing, hostels, support services, shelter allowances and a rent bank would be approximately $339.7 million annually.10 Under the Golden Report’s formula, the City of Toronto would have to spend an additional $26.2 million annually and the balance would come from the provincial and federal governments. Clearly, there is a very significant role for the provincial and federal governments in addressing homelessness.
On November 17, 1999, federal Public Works Minister Alfonso Gagliano signed an agreement with Ontario Municipal Affairs and Housing Minister Tony Clement, which transferred control of social housing to the Province. The agreement gave the Province responsibility for 200,000 social housing units, along with $80 million for maintenance and rental supplements. In an editorial on November 29, 1999, the Toronto Star predicted that "as soon as Ontario gets the housing units, it will offload them on the municipalities, as it has done with its own social housing. But local governments do not have the funds to operate and maintain them."11
| Recommendation 2: |
| Governments must recognize and act on their responsibility to address homelessness and the shortage of affordable housing. Responsibility for housing should not be downloaded to municipalities. |
A Co-ordinated National Housing Strategy
Canada needs a co-ordinated national housing strategy, involving all levels of government, to alleviate homelessness and increase the availability of affordable housing. The federal government must take a leadership role in developing a comprehensive, co-ordinated national housing policy with the clear goal of creating new, affordable rental housing. Such a policy would recognize the need to foster an investment climate that encourages the construction of affordable rental housing, promotes housing and support services for the homeless, and provides financial assistance to low income tenants who are most at risk in cities like Toronto.
Co-operation between the federal, provincial and municipal governments will be critical to the effectiveness of such a policy. While all three levels of government have introduced various initiatives to address the issue of homelessness, the lack of coordination is undermining their effectiveness. For example, in November 1999, the Ontario government announced that it would promote construction of affordable housing by providing a grant of $2,000 per rental unit to offset the Provincial Sales Tax (PST), on construction materials.12 While this is a step in the right direction, it is unlikely to spur new rental housing in the absence of a corresponding program to offset Goods and Services Tax (GST), expenditures.
In December 1999, the federal government also took a step in the right direction with the announcement that it would invest approximately $750 million over the next three years to help alleviate and prevent homelessness. The funding will be targeted at unemployed youth, aboriginal persons and victims of family violence. The funding will also be used to expand the government’s Residential Rehabilitation Assistance Program, which supports the renovation and repair of housing occupied by low income people to bring it up to health and safety standards.
In making the announcement, Minister of Labour and Federal Co-ordinator on Homelessness, Claudette Bradshaw, said, "Community groups want the Government of Canada to be a partner in a national effort to eliminate homelessness. This effort, in order to be successful, must be a partnership between all orders of government and the private and voluntary sectors."13 The Board agrees.
| Recommendation 3: |
| The federal government, working closely with provincial and municipal governments, social agencies, and the business community must immediately develop a comprehensive and co-ordinated national housing policy to address homelessness and the shortage of affordable housing. |
Changing the Regulatory and Tax Environments
Changes made by the federal government in an effort to close "loop holes" in the federal tax system since the early 1970s have discouraged private investment in rental housing. Since 1972, when a major reform to the income tax structure took effect, the income tax rules affecting rental housing have become increasingly punitive. Changes in the tax treatment of losses due to capital cost allowance (CCA), the amount of CCA deductible, allowable soft expenses, the deferral of taxes payable on recaptured depreciation upon reinvestment, and the application of tax on capital gains have substantially reduced the attractiveness of investment in rental housing. The application of the GST to the full cost of new rental housing has further aggravated the tax changes introduced. As the major purpose of these changes was to close "loop holes", little consideration was given to the impact of these changes on the investment in, and the production of, new rental housing and the cost of rental units to tenants.
While we appreciate the announcement in the 2000 federal budget of the residential rental property rebate of 2.5% for newly constructed, substantially renovated or converted residential rental accommodation, stronger action is required. Overall, sales taxes still represent a substantial burden to developers of affordable housing.
The budget also reduced the capital gains inclusion rate for calculation of income tax from three-quarters to two-thirds, which will assist in enhancing the attractiveness of rental property as an investment. We hope further cuts to the capital gains inclusion rate will occur that match the lower rate announced in the 2000 Ontario Budget.
Changes in the tax system that encourage investment in and production of rental housing must be an important part of any national housing policy. Specific changes that should be considered by the federal government include:14
- allowing investors to defer CCA recapture and capital gains on the proceeds from the sale of rental property when the proceeds are reinvested in another rental property within a reasonable amount of time (as allowed under the U.S. federal tax system);
- allowing a GST exemption on new rental housing projects and major renovations to existing rental accommodation (this would treat private rental housing projects the same as social housing);
- allowing all investors in rental housing projects and not just Principal Business Corporations15 the opportunity to deduct CCA losses against other income; and
- expanding the "soft costs" which can be deducted in the first year of operation of new rental properties.
The Board believes that through the generation of jobs and increased economic activity as a result of new rental housing projects, revenues foregone by the government as a result of these changes will be offset by increased income and sales tax revenue.
In addition to changes that foster the construction of new rental housing, there must also be changes to the taxation of the multi-residential property class.
Provincial ranges of fairness refer to a target range set by the provincial government for municipal tax ratios. Each property class rate has a target fairness range that is defined as the ratio of the municipal tax rate for each property class in relation to the residential property class rate. The upper limit of the provincial fairness range for the multi-residential tax property class is 1.1 or 10% above the municipal residential rate.
In Toronto, the multi-residential tax rate for 1999 was 4.6, which is almost four times the rate for residential property. The Board believes that moving the multi-residential tax rate to within the provincial fairness range within five years would make rental accommodation more affordable and spur new construction.
In an attempt to address this gap, the City created the New Multi-Residential class which allows new multi-residential developments to be taxed at a rate equal to the residential rate for a period of eight years. The fact that there is a limit on the length of time to which the equalization applies is a deterrent to new development. The solution is to remove the eight-year time limit.
| Recommendation 4: |
Governments must create a tax and regulatory environment, which promotes the building of new affordable housing by:
- waiving municipal fees and charges on new rental housing production;
- waiving the PST and GST on new rental housing;
- restoring the federal tax treatment of rental housing to pre-1971 levels;
- equalizing property taxes between rental and ownership housing; and
- reducing financial costs for new affordable housing.
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Increasing the Supply of Affordable Housing
One of the key measures for alleviating and preventing homelessness over the long-term is ensuring a new supply of affordable housing. But traditional programs designed, funded and implemented exclusively by government will not suffice. The Board believes that innovative approaches, particularly the use of public-private partnerships, are a far more efficient and cost-effective way to provide the required housing and services.
The private sector can develop and operate new affordable housing and government must provide adequate levels of funding for support services. While the private sector can provide a range of affordable housing and services, it cannot provide all of the housing needed – at least not at a reasonable rate of return on its investment. In such cases, government must provide housing and services directly.
The Board believes that governments can help alleviate homelessness and increase the supply of affordable housing within existing envelopes of spending. Governments should explore the feasibility and potential efficiencies of using new and innovative models such as public-private partnerships, outsourcing, divestiture and equity partnerships in building and operating affordable housing. Among other proposals, we support the use of public lands for construction of new affordable housing units and tax abatement.
One promising example of a public-private partnership is Eva’s Phoenix. Administered in Toronto by Eva’s Initiatives, this project takes employment training programs one step further. Starting in the spring of 2000, this program will provide shelter and employment training for 50 youths for up to one year. Under this innovative partnership program, made possible through the co-operation and contributions of the public and private sectors, social service agencies and organized labour, program participants will be housed in one of ten "townhouses" to be constructed inside a warehouse donated by the City of Toronto. A number of program participants are employed in the building of the townhouses. To qualify, residents must take part in employment training opportunities provided by participating businesses to help them make the transition to independent, self-sufficient lives. In addition to providing employment training opportunities, businesses have donated part of the construction materials for the townhouses. Such co-operative, multi-sector partnerships could be expanded through the greater involvement of the private sector.
| Recommendation 5: |
| Public-private partnerships must be leveraged to increase affordable housing. |
Expanding tenant assistance programs
There are thousands of individuals and families in Toronto at risk of losing their homes due to lack of affordability. According to the Report of the Mayor’s Homelessness Action Task Force, 106,000 tenant households were paying more than half their income on rent in 1996 (the most recent year for which this information is available). Approximately 60 percent of these households were receiving social assistance benefits, and approximately 40 percent were the working poor.16
This at risk group can be helped most effectively through a rent supplement program, coupled with some support services. However, rent supplement programs can only be implemented in an environment where there is adequate housing.
On November 19, 1999, the provincial government announced that, through the Ministry of Municipal Affairs and Housing and the Local Housing Authority, it administered approximately 23,000 apartments under its rent supplement program.17 This is a good start. But, given the large numbers of individuals and families who spend more than half their income on rent, this program is obviously inadequate and should be expanded.
| Recommendation 6: |
| The provincial government must investigate the feasibility of expanding its rent supplement program to assist individuals and families who are at risk of becoming homeless. |
What Business Can Do To Help
The private sector can also address the problem of homelessness through many different avenues. A number of Toronto businesses, for example, donate money, food, clothing and services to help the homeless. Others work with agencies such as Goodwill to promote training and employment opportunities. These programs are highly effective in assisting participants to maintain stable housing and could be expanded through greater participation by the private sector.
| Recommendation 7: |
| Toronto area businesses should continue to work with and expand their contributions to community outreach projects that help the homeless or those at risk of becoming homeless. |
Toronto Board of Trade Initiatives
The Toronto Board of Trade believes that homelessness and the lack affordable housing must be addressed. To date, The Board has taken a number of steps to foster discussion and debate around this issue. The Board’s 2000 federal and provincial budget submissions urged government to take action on this issue. The Board attended the National Symposium on Homelessness and Housing, and has incorporated the issue of homelessness into its advocacy agenda.
It is not often that we wade into high profile social issues, as we are the first to recognize that these are areas in which we lack specific expertise. But we take seriously our mission to build a better community through business leadership — and that includes all aspects of the community. While government must lead in resolving these issues, we believe the business community, social service agencies and others also have important parts to play. The Board is prepared to take action on the following initiatives:
Toronto Board of Trade Activities Going Forward:
1. Continue advocacy efforts at all levels of government.
2. Raise awareness of the business community’s existing initiatives and help co-ordinate these efforts, while promoting new co-operative business ventures.
3. Bring together the different levels of government and an alliance of stakeholders to initiate the development of a national housing policy.
4. Promote and develop links between business, non-government organizations, such as Goodwill, and government agencies. These links might include, for example, creating or coordinating training and employment opportunities for the homeless through Goodwill’s programs in conjunction with key corporate partners.
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The issues faced by the homeless and those at risk of becoming homeless, directly and profoundly affect the health of communities, the success of business and the quality of life in our city. We need immediate and effective action to alleviate the problems of housing and homelessness if we are to protect the quality of life in Toronto and ensure the city remains one of the best places in which to live and work. The result of doing nothing will be to undermine the economic strength of the Greater Toronto Area, its ability to create job opportunities, and to attract and retain strong businesses and good people.
To move forward, there must be a strategic and co-ordinated action on the part of all levels of government, working together with the business community and social service agencies. The Board is prepared to provide a forum for all the parties to come together to generate an action plan. We invite the municipal, provincial and federal governments and other stakeholders to join us in addressing Toronto's homelessness crisis.
Conclusion
We live in an era of increased global competitiveness, with cities around the world, and particularly in the U.S., investing heavily in their social and physical infrastructure. Toronto must maintain and improve its infrastructure or lose ground to other cities in North America and elsewhere. Addressing homelessness is an important part of maintaining Toronto’s attractiveness as a place to live, work and conduct business.
As it is, Toronto is not providing for the homeless population or adequately protecting those at risk of losing stable housing. We are also doing little to increase the housing stock or the choices available for affordable rental or ownership options. With Toronto’s growing population, providing for the homeless will become an even more daunting and urgent challenge.
In the past ten years, Toronto’s homelessness problem has evolved to a crisis stage. It will take time, ingenuity and co-operation to deliver solutions. The one certainty is that there is no simple answer. The causes of homelessness are complex and inter-related. Solving them will require co-operation among the widest group of stakeholders – including all levels of government, the business community and social service agencies. The Toronto Board of Trade is committed to doing our part to address the shortage of affordable housing and ultimately to alleviate homelessness. We believe government must take the lead to ensure all citizens have the opportunity to participate fully in our society.
APPENDIX A: Summary of Recommendations
- Government programs to assist the homeless must address both the direct and underlying systemic causes of homelessness and focus on the specific needs of the individuals and families they seek to help.
- Governments must recognize and act on their responsibility to address homelessness and the shortage of affordable housing. Responsibility for housing should not be downloaded to municipalities.
- The federal government, working closely with provincial and municipal governments, social agencies and the business community must develop immediately a comprehensive and co-ordinated national housing policy to address homelessness and the shortage of affordable housing.
- Government must create a tax and regulatory environment, which promotes the building of new affordable housing by:
- waiving municipal fees and charges on new rental housing production;
- waiving the PST and GST on new rental housing;
- restoring the federal tax treatment of rental housing to pre-1971 levels;
- equalizing property taxes between rental and ownership housing; and
- reducing financing costs for new affordable housing.
- Public-private partnerships must be leveraged to increase affordable housing.
- The provincial government must investigate the feasibility of expanding its rent supplement program to assist individuals and families who are at risk of becoming homeless.
- Toronto area businesses should continue to work with and expand their contributions to community outreach projects that help the homeless or those at risk of becoming homeless.
Toronto Board of Trade Activities Going Forward
- Continue advocacy efforts at all levels of government.
- Raise awareness of the business community’s existing initiatives and help co-ordinate these efforts, while promoting new co-operative business ventures.
- Bring together the different levels of government and an alliance of stakeholders to initiate the development of a national housing policy.
- Promote and develop links between business, non-government organizations, such as Goodwill, and government agencies. These links might include, for example, creating or coordinating training and employment opportunities for the homeless through Goodwill’s programs in conjunction with key corporate partners.
APPENDIX B: Examples of Comprehensive U.S. Programs
The federal government has played an important role in the area of affordable housing in the past and must actively re-engage itself. Successful experiences of the U.S. federal government in this policy area offer new methods for our government to explore. We urge the federal government to learn more about the following programs to determine their suitability and adaptability to a Canadian environment.
In the U.S., the Department of Housing and Urban Development (HUD) oversees the federal government’s housing policies and programs. American housing policy initially focused on increasing the production of affordable housing through new construction or rehabilitation of existing stock. More recently, its focus has shifted to direct rent subsidies for existing housing for tenants who can demonstrate need.
To increase production of affordable housing, for example, the U.S. government relies mainly on tax incentives. Congress enacted the Low Income Housing Tax Credit in Section 42 of the Internal Revenue Code in 1986.18 Its objective is to provide investor equity capital to reduce debt service and thereby lower rents. In effect, the U.S. has used the tax code to deliver a component of its housing program. The U.S. federal government also promotes new construction of affordable housing through tax-exempt bonds.
In addition to programs designed to increase the production of affordable housing, the U.S. government has a tenant-based assistance program, commonly referred to as the "voucher" program. The voucher program is targeted at low income and very low income individuals or families. It provides a subsidy to qualifying tenant households to assist them in securing and maintaining appropriate housing from private sector providers.19
As the U.S. government has demonstrated, it is possible and indeed appropriate for the federal government to engage in a housing policy at a national scale. Consequently, The Board believes that the federal government in Canada should also be more actively involved in addressing homelessness and the shortage of affordable housing in Canada.
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