Hard place

Housing Corporation faces significant hurdles

Two rounds of funding applications have failed. It has no money. It owes the municipality more than it has cash in the bank. Yet the Prince Edward County Affordable Housing Corporation (Housing Corp) remains confident it can get an eight-unit apartment block out of the ground in Picton this year.

To do so, it must find at least $2.7 million. A bank will lend it $2.3 million. But it will only do so if the Housing Corp can fund the balance—money the Housing Corp doesn’t have.

If it is to happen at all, it seems clear the municipality will have to dig deeper into taxpayers’ pockets to keep the Housing Corp’s plans afloat, at least until the board learns whether it has had any luck on its third attempt at federal funding.

Meanwhile, a deadline is looming. The Housing Corp must secure financing before the end of the month. Even if it manages to do all this, the result will be a total of three new apartments offered at “affordable rents” ranging from $1,320 to $1,588 per month. The remaining five units will be offered at market rent.

FINANCING
The Housing Corp had planned to borrow the entire $2.7 million, but the lender can’t go all the way. It is prepared to lend $2.3 million at 4.15 per cent over 50 years. The bank needs the Housing Corp to come up with the balance.

“It makes perfect sense,” explained Hilary Spriggs, a public member of the board, who appears to be taking the lead in the financing negotiations. “We have no assets to our name. Now we must find equity.”

A loan won’t cut it. The Housing Corp needs a capital injection. It needs either grant funding or a fresh investment from the County. Oddly, this particularly pivotal challenge didn’t come up when the chair, Councillor Phil St-Jean, addressed Council last week with an update on the Housing Corp.

“Things are finally happening,” reported St-Jean.

But inside the nitty-gritty of financing the eight-unit apartment block, challenges remain. Board member Spriggs attempted to persuade the County’s finance director, Arryn McNichol, that the Housing Corp’s debt to the municipality should be considered a “gift” or a “contribution”.

“Why?” asked Sprigs rhetorically. “Because any institution looking to loan us money [will see] we are way underwater. They won’t be willing to loan us the money.”

Director McNichol pushed back on the notion.

“It is a debt,” explained McNichol. “We have the invoices that the County paid on behalf of the Housing Corp. It will have to be paid back.”

Another public member suggested that, since at least part of the expenses relate to the cleanup of the Niles Street property in Wellington, the municipality should absorb these costs.

Coun. St-Jean agreed.
“Thank you for making that statement because it is the absolute truth,” said St-Jean.

But it doesn’t change the fact that the Housing Corp incurred these expenses on land it was given. And until such time as the terms of the arms-length organization change, forgiving or assuming debt is not in the purview of the County’s finance director.

Furthermore, it is a terribly fraught basis upon which to demand further investment from the municipality.

Coun. John Hirsch, yet another council member sitting on the Housing Corp’s board, began shaping the argument for a municipal capital injection request.

“We are in really tough getting financing for this first project,” Hirsch worried aloud. “The better we can make our books look, the better the chance we have.”

There was yet another wrinkle to the Housing Corp’s financing prospects presented at the board’s March 13 meeting. The bank has advised the board that, for a fee of about $30,000, it might be able to broker a deal to borrow an additional $200,000 from another lender.

But this alone won’t close the funding gap. The Housing Corp will still likely need to appeal to the County council in the next few weeks. A combination of urgency and looming failure of the Housing Corp may provide a compelling narrative.

Last month, the County’s Chief Administrative Officer, Adam Goheen, told the board he felt the plan was too risky—that unless the Housing Corp received some grant funding, the numbers didn’t work.

The Housing Corp has, so far, blown through all the stop signs. It seems intent on making Council decide its fate.