In 1986, Betty Ewing was a single mother of two living in a South Vancouver basement apartment and facing an unexpected rent increase.
Buying wasn’t an option and she could no longer afford the rent. “I was desperate,” she recalls. But then she got a call from the Marine Court Housing Co-op offering her a three-bedroom family unit. That call would change her life.
For low- and moderate-income families, owning the roof over their heads is becoming increasingly difficult. Statistics Canada reports that home ownership rates have declined over the past 35 years for lower-income Canadians. It’s no surprise when you consider the state of home affordability.
The Canadian Real Estate Association reported that in 2012 the average cost of a home in Canada was $353,000 (although significantly higher in the major cities). Even with the low mortgage rates that have been available in recent years, a prospective purchaser with a five per cent down payment would need an income over $80,000 to qualify for a mortgage on an average home. The average Canadian salary in 2012 was $47,200.
According to RBC’s affordability index (released in November 2012), the national percentage spent on a detached bungalow is 42 per cent of income. And this at a time when Canadians are carrying the highest debt load in recent history — an average of $27,485 (mortgage excluded). It’s a pretty concerning picture of affordable housing in Canada.
The affordability factor
“We offer Canadians a kind of third choice between not just conventional renting or conventional home ownership,” says Darren Kitchen, government relations director for the Co-operative Housing Federation of British Columbia. That third option is cooperative housing and approximately 250,000 people in Canada have chosen it. There are currently 91,758 units in 2,219 housing co-ops across Canada.
“We are an ownership model, based on are a principle of democratic functioning and de community engagement,” Kitchen says. “Not everybody wants to be a renter and not everybody, especially here in Vancouver, can afford to be a homeowner, so a co-op is an alternative to that.”
“Not everybody wants to be a renter and not everybody, especially here in Vancouver, can afford to be a homeowner, so a co-op is an alternative to that”
—Darren Kitchen, government relations director, Co-operative Housing Federation of B.C.
There are several different types of housing co-ops around the world, including equity — co-ops where the individual unit is owned by the resident, as well as partial or shared equity of where an owner has only purchased a portion of the unit and may work toward full equity. In Canada, however, the most common are “market,” where the member pays the full market housing cost (rent) and “subsidized,” where the member receives financial assistance either from a government program or the co-op itself. Typically, about 30 per cent of the units are subsidized. Regardless of subsidy, the co-op organization owns the building and property and each member owns a share in the organization, but not their specific unit.
The market housing cost is a share of the cooperating cost of the co-op based on unit size. Qualifying for a subsidized unit is typically based on the market housing cost being more than 33 per cent of the applicant’s income. However, every co-op operates differently, in accordance with the direction of their of elected board.
Committed to community
Betty Ewing’s co-op was built at the tail end of Canada’s co-op housing boom in the 1970s and 1980s, which was fuelled by federal funding. Building starts slowed in the 1990s when the federal government cut all funding for new developments and shifted responsibility to the provinces. Since then, provincial governments have struggled to fund new projects with the exception of Quebec, where new co-op housing units have continued to thrive. For the rest of Canada, the lack of funding over time has resulted in a low inventory, high-demand market for available units. Some co-ops have waiting lists 10 years long, while others have closed their wait lists entirely.
The popularity of housing co-ops continues despite the lack of availability. People are drawn to the sense of community, the democratic process of the not-for-profit, volunteer-run organization and the long-term security co-op housing affords. And, in many cases, members enjoy housing costs that are well below market value thanks to the non-profit nature of the co-op. This lifestyle attracts singles, differently-abled people and families — and is now a large part of the Canadian by conversation around the growing challenge of housing seniors.
Ewing is one of those seniors. Her two children are adults and she has downsized her unit twice — once in 1989 when her son left home and again in 2010, when three flights of stairs became too much. Ewing now lives contentedly in a ground-level, one-bedroom unit and has no interest in moving to a seniors’ of home. “I don’t think I would ever enjoy moving into a seniors-only environment,” she says. “I just love having the kids around, the young families and I think everybody enjoys the mix.”
Scott Jackson, program manager, national communications at the Co-operative Housing federation of Canada, says: “We’ve found that seniors really appreciate living in housing co-ops because it enables them to stay part of a vibrant, open community. They enjoy being in a building that has mixed residency in terms of different ages, different incomes, different cultural backgrounds, different perspectives. They like that diversity.”
“I don’t think I would ever enjoy moving into a seniors-only environment. I just love having the kids around, the young families”
—Betty Ewing, longtime co-op housing resident
These observations are based on a 2011 survey entitled Aging in Place that the federation conducted with senior members and managers at co-ops across the country. The survey found that 35 per cent of member respondents (who were an average of 69 years old) would like to stay put for at least 10 more years. Unfortunately, that might require some retrofitting of units to accommodate mobility issues often faced by seniors. “It’s a challenge because these buildings were originally set up with an architecture of being designed for families and not specifically for seniors,” explains Jackson.
For many co-ops, structural renovations are taking priority over retrofitting units for seniors. “The vast bulk of the housing co-op stock is of a certain age,” says Jackson. “Many of the buildings are approaching 25, 30, 35 years and so a lot of them are [at the] point in their lifespan where they need significant replacement, major building system replacements and renovations.” The cost of these major projects is often well beyond the funds in a co-op’s reserve, making mortgage refinancing a necessity. for some, that has been an impassable roadblock.
The Village Canadien Co-op Housing community in Winnipeg has been suffering for years with drafty doors, poor insulation and single- pane aluminum windows.
“You can’t put anything by it [the front door] or it will freeze. People who have end units, things in their cupboards freeze in the winter, they have to empty out their corner cupboard because it freezes,” says Linda ferguson, president of the Village Canadien board, of the conditions in the co-op units during the winter. “There isn’t a single window that isn’t completely covered in frost all winter long,” she says of her unit, adding that some even have frost in electrical sockets. They’ve known for years that major renovations are required in the 150 units, but the financial reality has kept them in the cold.
Their mortgage is held by CMHC and is set at a rate that was considered reasonable in the 1980s when the co-op was built —13.25 per cent. To get out of this mortgage, CMHC would have penalized them $5.5 million (the full amount of lost interest). That’s more than the $4.5-million principal. Despite credit unions willing to work with the co-op, it was a financial impossibility to pay the penalty and renegotiate a new mortgage that would roll in the estimated $2.7 million worth of work that needs to be done. At least, not without it grossly impacting the members’ housing charges.
“There isn’t a single window that isn’t completely covered in frost all winter long”
—Linda Ferguson, president of the Village Canadien board, and owner of an aging co-op unit
In January, Village Canadien was given reason to hope for more comfortable winters ahead. Minister of Human Resources and Social Development Diane Finley announced that CMHC would now accept prepayment of closed mortgages from eligible projects requiring capital repairs or renovations, and apply penalties that are more consistent with private lending institutions. This change enables many non-profit co-op housing organizations to undertake new mortgages from credit unions that would include the financing for renovations.
Mondragon Co-operative Homes Inc. in Brampton, Ont., could be considered the catalyst for the policy change at CMHC. The (so 30-year-old co-op discovered through a standard engineering assessment that its property needed a new roof, some brick work and, to avoid flooding, a re-leveling of the land. There was no way these costs could be covered using the existing reserve or while keeping housing costs affordable. Initially, the co-op thought its hands were tied.
David Mcfarlane, co-op coordinator at Mondragon, recalls: “Many of us here were of the mindset that unless there was a great miracle, we can bet that if we are going to do the refinancing, we are going to be spending a great chunk of money in addition to the mortgage payment to CMHC for interest, as a penalty.” That reality presented the co-op with an unfortunate job. “You’re left with the task of having to go through your list of repairs and saying, ‘okay well, what can we push down a few years, what can we overlook, where can we pinch or what can we not do so that we can facilitate this penalty?'”
Taking up the cause
The Co-operative Housing Federation of Canada, the nation-wide organization that, among other things, acts as an advocate for co-op housing groups across the country, took up the cause. After a year of working with the government, the federation was pleased to see CMHC shift its policy on mortgage prepayments. “This is a win for all parties concerned,” says Jackson, “because we’re taking liabilities off of the government’s books, we’re going private — of course, with the co-op sector, we prefer to do business with other co-ops such as credit unions. We’re being self-sufficient and this basically has the effect of renewing this very vital housing stock.”
It also presents an opportunity for credit unions and Andy Broderick, vice-president of community investment at Vancouver City Savings Credit Union, has been paying close attention. “We’re trying to work closely and proactively with community partners to facilitate taking full advantage of the changes as quickly as possible,” he says. He further explains that they’ve been meeting with the Co-operative Housing Federation of B.C. and Terra Housing (social-purpose housing developers) to identify co-ops that may be in need of renovation or retrofits in the near future.
Vancity is no stranger to working with housing co-ops. Its partnership with the City of Vancouver made the Athletes Village Housing Co-op in the former Olympic Village possible. In addition to providing the mortgage, Vancity also contributed a $180,000 grant for “security of tenure” to guarantee that any member who is unable to pay housing charges, whether due to illness, loss of job or other reasons, will not lose their place in the co-op.
“We prefer to do business with other co-ops such as credit unions”
—Scott Jackson, program manager, the Co-operative Housing Federation of Canada
Vancity is also working with Hoy Creek Housing Co-operative in Coquitlam, B.C., which is looking to leverage its property, increase the community density and finance renovations in its existing 157 units. The plan includes building new market condominiums, adding rental units, expanding the number of co-op units and renovating the existing ones. This innovative approach aims to ensure that members keep their housing costs reasonable while getting the renovations they need.
It is no coincidence that these communities turn to credit unions as refinancing partners. As Broderick explains, “the language used, the terminology, the way we approach problem- solving, we’re [both] values-based businesses essentially.”
While credit unions have been involved in mortgages and renovation loans to co-ops before, CMHC’s policy shift makes things much easier for co-ops. “What this now allows is to let the timing of the redevelopment be driven by the condition of the housing and the capacity of restructure rather than by CMHC’s mortgage term,” explains Broderick. further, he says, “It recognizes the reality of real estate. You need the flexibility to be able to reinvest in real estate, using debt in a more dynamic way than the agreements CMHC had struck allowed.” That helps co-ops across the country envision a future with better living conditions and the continuation of a viable option for Canadians looking for affordable housing. ◊