Lender of last resort

Council loans $5 million to Housing Corp.

Council has agreed to loan the municipal Affordable Housing Corporation (Housing Corp) up to $5 million for five years. In a meeting last week, council approved extending some of Shire Hall’s “idle cash” as a lifeline to the agency. The Housing Corp is out of money. It has burned through all of its seed funding and reserves in demolishing the former Duke Dome. It owes the municipality more than half a million dollars.

Phil St-Jean is one of the two council members who serve as directors of the Housing Corp. He says all other funding efforts have been exhausted. Without a loan from the County, the Housing Corp is at the end of the road.

“Without a large sum of funds, we will be doing nothing,” said St-Jean. “We can’t do anything because we don’t have any money. We’ve had no support from the federal government and little support from the province.”

That wasn’t how this was supposed to be.

In the summer of 2018, then Community and Economic Development chief Neil Carbone proposed a municipal affordable housing corporation.

As The Times wrote then, “Carbone comes to the table with critical insight, a strong plan and direct experience with the power and effectiveness of a municipal housing corporation.”

The Housing Corp prepared detailed plans to access various pools of capital to fund affordable homebuilding in this community. But the following summer, Carbone was gone. A highly regarded technocrat came and went. So did Covid. Last year, the County’s former operations chief, Adam Goheen, was appointed to lead the Housing Corp.

Six years later, the plan is in shambles, and the Housing Corp has run out of money or agencies willing to fund it. Any “direct experience” in developing and constructing multi-unit residential apartments is thin. The Housing Corp has an empty lot with a plan to build 40 apartments in Wellington and another empty lot in Picton with plans for a 12-unit apartment. But it has no means to make this happen.

Mayor Steve Ferguson summed up the situation as he saw it.

“At this point, we’ve done effectively nothing. We have to do something. We have to start something. We committed to it years ago, and nothing has happened,” said Ferguson, urging his colleagues to approve the loan.

But there were questions.

Sophiasburgh councillor Bill Roberts took the lead, asking the County’s finance director, Amanda Carter, how the loan would work.

Roberts: Do we have the skills capacity to oversee and manage such a construction loan?”

Carter: “Yes, we have the expertise on staff to oversee and manage the loan.”

Roberts: “Is it a one-off transaction, or is it a precedent?”

Carter: “I do feel this is a one-off; this is not a precedent. I am not comfortable, as treasurer, opening up [this form of financing] to any other aspect of the municipality.”

Roberts: “What is your confidence level of loan repayment?”

Carter: “I am fairly confident. If the affordable housing corporation defaulted on the loan, the municipality, as the sole shareholder, would be taking on that debt. So a lien would be put against the property to establish priority status.”

Janice Maynard added another.

Maynard: “Have you looked at other municipalities that have financed their projects in this way?”

Carter: “No, I have not.”

That was it. A majority of council was satisfied. But not all.

Hallowell councillor Phil Prinzen worried “that $5 million won’t be enough. When will it stop? And if we are in $5 million it could go farther. Once you start you can’t stop,” said Prinzen.

Councillor Chris Braney proposed a delay to consider alternatives.

“We are not the city of Toronto,” said Braney, “[We don’t have] this kind of experience. I don’t feel comfortable going down this rabbit hole with this money. I am not convinced it’s going to be $5 million. It’s going to be more.”

There was, however, little interest in putting off the decision or for greater scrutiny.

“I see this in a practical light,” said John Hirsch, South Marysburgh councillor. “There are two properties we want to develop. They need money. If they went to the bank, we would still be on the hook for repayment. I have no worry that our staff can manage such a program. Otherwise we stop, and we can’t do that.”

Most were persuaded that these were the only choices before them.

“I recognize that this requires some faith the housing corporation is moving in the right direction,” said St-Jean. “I have a lot of faith in the people who sit on that board. I am asking council members to take that little, tiny small piece of faith and say, yes, we are willing to invest in our community, invest in affordable housing.”

“We will prove that this is doable. Despite the fact that we have zero support from the federal government. Let’s lead. Let’s lead.”

And that is how the County loaned $5 million to the Housing Corp.

Where we stand

The municipality has extended a loan of $5 million to the Housing Corp. It intends to use the proceeds of this loan to move the Wellington project (40 units) and Picton project (12 units) through technical design, engineering, and permits so that they are construction-ready. When that benchmark is achieved, the Housing Corp will return to the market to assess the appetite for funding from federal and provincial sources.

The Housing Corp estimates the construction cost of the Wellington project to be in the $20 million range, while the Picton apartment block will cost about $4.4. million plus pre-construction costs of about $450,000 and $250,000, respectively.

The loan carries a 2.5 per cent interest rate, but while the interest will be calculated, the Housing Corp won’t be required to pay anything until “renters are in place,” said Amanda Carter, director of finance. “The other option is when they get to the construction phase, they issue a debenture and pay the County back with those funds.”

Developer raises hand

During the loan debate at Council, Wellington councillor Corey Engelsdorfer advised his colleagues that a developer had reached out to him earlier in the day to discuss the Wellington affordable housing project.

“The developer is in similar discussions with the Affordable Housing Corp in Blue Mountain,” said Engelsdorfer. “The Housing Corp is doing good work, but ultimately, it hasn’t built a single unit. Could we pause this to have discussions?”

But St-Jean waved away the suggestion.

“They [the developer has] never stepped up in the past,” said St-Jean. “The Housing Corp has actively been seeking partnerships.”

Engelsdorfer was skeptical.

“Has anybody picked up the telephone and talked to them?” Engelsdorfer asked his council colleague. “You say you’ve exhausted all options, but I made one phone call, and there seems to be interest.”

St-Jean’s story changed. By all options, he meant some options.

“As you know, private investment looks for a profit,” said St-Jean explaining capitalism to the Wellington council member. “Nobody does anything for free. While this is something we have actively been trying to work into the mix, it is not necessarily the most viable option. Or the most realistic.”

Of course, the County doesn’t intend to lend this money for free either—it is charging interest at 2.5 per cent. But the point was made. Why mix water in your wine when the County taxpayer’s wallet is on the table in plain view?