On Tuesday, city council will sit for a special general committee meeting with just one item to consider: who should take charge of a massive redevelopment project that would significantly increase Peterborough’s affordable housing supply.
The plan coming forward is to redevelop and intensify six properties that are currently owned by the Peterborough Housing Corporation (PHC). If realized, it would create more than 1,000 new housing units over the next decade, with the majority of them having below-market rents.
But the redevelopment plan has triggered another big question: who should own PHC’s portfolio of affordable housing moving forward? And who is best positioned to bring this redevelopment to life?
[Update: Council voted on February 22 to move forward with the plan recommended by staff: establishing a government business enterprise. See below for details on what that means.]
The Peterborough Housing Corporation is currently the largest provider of community housing in the city. It was established in 2000 by the municipality in response to the provincial government’s downloading of social housing to the municipal level. To this day, most of its portfolio consists of the rent-geared-to-income housing it inherited through the social housing download.
But over the years, PHC has expanded its role and developed new affordable housing as well. Its most recent project in Peterborough was a 34-unit building on Bonaccord Street, where the rents are capped at 80 percent of average market rent.
PHC’s portfolio now consists of 910 rent-geared-to-income apartments and 297 affordable apartments.
Currently, the City of Peterborough controls the governance of PHC through a shareholder declaration that was signed when the corporation was founded.
But to carry out the redevelopment, PHC has proposed establishing a new non-profit that would have independence from the City. This new non-profit would assume ownership of the six properties and then carry out the intensification project.
But losing control of the redevelopment isn’t sitting well with city staff, according to the staff report going forward at Tuesday’s meeting. As an alternative, staff recommend the City forms its own public corporation that would itself take ownership of PHC’s affordable housing portfolio and carry out the development.
Under either scenario, the redevelopment would need to receive financing through the National Housing Strategy’s Co-Investment Fund in order to proceed.
With the COVID-19 pandemic exacerbating an already severe housing crisis, the stakes are high.
“This is one of the biggest decisions that this council will make,” Mayor Diane Therrien told Peterborough Currents in advance of the meeting.
To get you up to speed, here’s everything you need to know about the intensification plan and the two proposals for how to carry it out.
The intensification plan
The six properties under consideration for redevelopment currently comprise 311 rent-geared-to-income (RGI) apartments, according to the staff report being received on Tuesday. These buildings are ageing and PHC says they have “lived their life.” If nothing is done to renovate or replace them, there is a risk they will become uninhabitable over the next 15 years, according to a business case submitted by PHC to the City of Peterborough.
PHC’s proposal, which has been in the works since at least 2017, is to demolish and rebuild on the properties. In the process, there would be a significant increase in density. The plan envisions building 1,093 new units in addition to rebuilding the 311 RGI units.
Of the 1,093 new units, it is assumed that 85 percent would be affordable (i.e. a certain percentage below average market rent) and the remaining 15 percent would be rented at market rates, according to a review of the proposal by auditing firm KPMG.
Darlene Cook, the CEO of PHC, writes that on “most sites” it would be possible to build before relocating tenants to the new buildings. “We have a plan that will cause the least disruption for our residents and will keep children in their schools and provide security for everyone.”
Cook says she is reluctant to share what properties are identified for redevelopment before residents can be consulted. “We don’t want to cause anxiousness before we are sure we can move forward,” she adds.
PHC’s bid for independence
While Peterborough Housing Corporation has developed this intensification plan for its properties, it’s not clear that it can move forward on it just yet.
That’s because it would require more than $300 million in debt financing, and under its current corporate structure PHC is constrained by the City of Peterborough’s debt limits, according to the KPMG and staff reports. Since the City relies on debt financing for much of its capital program, it’s important to use the municipal debt capacity efficiently.
To get around this, PHC has proposed establishing a new, independent non-profit without any ties to the City. This new non-profit would take ownership of the six properties and lead the redevelopment. By virtue of its independence from the City, the new non-profit would be able to borrow the funds it needs for the project.
Under this plan, the current PHC would continue to own the remainder of its portfolio — i.e., everything that’s not on the six sites identified for redevelopment.
While apparently supportive of the intensification plan, city staff are wary of PHC’s proposal to break ties with the municipality, according to the staff report. “The full separation of PHC from the City would see the relinquishing of governance control over a key municipal asset and priority,” the report states.
The report lays out three specific concerns. First, without full control, the municipality could not intervene if at some point in the future the non-profit decided to convert affordable units to market units.
Second, the municipality could lose control over what kinds of units get built and whether they are aligned with the community’s needs. The City’s 10-year housing and homelessness plan identifies the creation of permanent supportive housing as a key objective to alleviate chronic homelessness, for example. One-bedroom and bachelor apartments have also been identified as a key priority for Peterborough.
Lastly, the KPMG and staff reports warn that should the independent non-profit fail, there is a possibility that its debt could become the responsibility of the municipality.
In an email to Peterborough Currents, Cook writes, “We always have been committed to keeping our [rents] affordable in perpetuity. That’s the mission and objective in all of this.” She also writes that the developments PHC is envisioning would be a mix of unit types from bachelors to 4-bedrooms and would include some supportive units.
The City proposes an alternative — taking over PHC’s affordable housing portfolio itself
According to KPMG’s report, there is another option that could solve the debt capacity issues without requiring the City to relinquish control of the redevelopment.
KPMG recommends the City of Peterborough form a government business enterprise, sometimes referred to as a public corporation, that would take ownership of PHC’s entire affordable housing portfolio, and then take on the development project itself.
Peterborough already owns at least one government business enterprise, its energy company City of Peterborough Holdings Inc, or CoPHI.
Government business enterprises (GBEs) are not legally permitted to receive significant subsidization from the government that owns them — they need to be a viable business on their own, according to the KPMG report. That would preclude one from owning any RGI housing. But a GBE likely would be permitted to own affordable housing, KPMG suggests.
Most importantly, a GBE’s debt does not need to be consolidated with that of the government which owns it. So, KPMG recommends the City incorporate a new GBE that would take ownership of PHC’s affordable housing stock only. This GBE, under the City’s ownership, would borrow the necessary money through the Co-Investment Fund and carry out the redevelopment of the new affordable and market units.
Under this plan, PHC would retain ownership of its RGI housing portfolio, including on the redeveloped sites. This means that the debt associated with the RGI portion of the redevelopment project would still negatively impact the City’s debt capacity.
In the report going to council Tuesday night, city staff recommend the course of action outlined in KPMG’s report.
The action plan involves taking the next year and a half to draft a business case and policies for the GBE, incorporate the GBE, negotiate the transfer of property from the PHC and make an application to the federal government’s Co-Investment Fund to finance the redevelopment. This process would cost money: the staff report recommends taking $550,000 from the social housing reserve fund to pay for setting up the GBE and making the application to the federal government.
According to KPMG’s timeline, this approach could see construction begin in late 2022.
‘Time is of the essence’
On Friday, MP Maryam Monsef, who in 2019 set a goal of working to build 2,000 affordable apartment units within two years, signalled support for PHC’s proposal over the one presented by city staff.
“Peterborough, over the next two to four weeks there are some really important choices and opportunities before us when it comes to housing,” she said. “One choice is to keep making good, positive announcements…. The other option is to be afraid and to hold back and to shortchange ourselves and our future.”
When asked if that was an expression of support for PHC’s proposal, Monsef said, “I’m familiar and strongly supportive of the Peterborough Housing Corporation’s proposal…. What I’m interested in is working with whoever can build the most amount of decent housing the fastest.”
Speaking with Peterborough Currents, Mayor Therrien echoed that sentiment. “The side that I’m on is the side that can get as many safe and affordable units built as quickly as possible,” she said. “In the KPMG report there’s a lot of discussion about control. Control to me isn’t the ultimate objective.”
“We need to get the ball rolling now, especially to take advantage of the federal funding programs that are open, but are on a time limit,” Therrien said.
The federal government’s Co-Investment Fund has a 2028 deadline for the completion of projects that receive funding. That will come up sooner than it seems, Therrien says, and she worries about the 18-month time frame that KPMG lays out for establishing the GBE and then applying for the funding.
“If we’re still building this new [GBE] for the next couple of years, well, are we going to be able to take advantage of those funds?”
The KPMG report also acknowledges that “time is of the essence if the City wishes to access funding under the program.”