The Elephant In The Room

Later today, City Council will be considering a recommendation from Staff to temporarily replace the Boards of Directors of both the City’s Housing Development Corporation (HDC), and the London Middlesex Community Housing Corporation (LMCH) with a single member of the City’s leadership team, until such time as the City can address a series of operational and governance concerns summarized in a Service Review report to Council by KPMG a few weeks ago.

While I am not a fan of any action by Council that can be perceived as diminishing the efforts of dedicated volunteer Board members, nor do I support Staff’s recommendation to create a just one-person Board (no matter how temporary), I sense from the urgency with which Staff is acting, that an immediate change to our current delivery model is necessary if we hope to quickly address the Service Review concerns and allow the City to reset the means by which it meets its community housing obligations.

That said, I am not writing this blog in response to the issues outlined in KPMG’s report. My focus today is on addressing our biggest housing concern, namely how to finance the estimated $400-500 million needed to restore both our existing social housing stock, and accommodate another 3,000-5,000 Londoners on the City’s housing waiting list.

It is, in effect, the proverbial “elephant in the room”.

Two years ago, I wrote a blog series entitled “London’s Underground”. It focused, in part, on the personal, societal and financial impacts of homelessness, and the critical importance of providing sustained “housing first” solutions to mitigating these impacts.  I also outlined several strategies that the City could take to materially improve our housing situation.  In the November 2017 blog I wrote:

Housing First is listed first because it matters most and can, by far, have the greatest impact on transitioning chronically homeless individuals away from shelters and stabilizing their lives.  In addition to being substantially less expensive, Housing First has the multiple impact of restoring a person’s dignity, providing them with a safe recovery and rehabilitation environment, and minimizing their need for London’s street services.  In London, it is my understanding that the Housing First initiative is working, but limited by resources and the number of available accommodations.  To help remedy this, our city should consider the following tactics: 

  1. Increase the resource commitment and intensity of this program.
  2. Expand the city’s affordable housing portfolio and social housing accommodations.
  3. Redirect the city’s budget allocation from shelter support to the Housing First initiative.
  4. Explore rent-subsidization and/or reduced property taxes for apartment providers in diverse neighbourhoods.
  5. Incentivize builders to increase social and affordable housing stock through reduced development charges.
  6. Consider introducing requirements for developers to direct a portion of their housing projects to include geared-to-income units.
  7. Fast-tracking approved plans through the planning process.

Last year, during the municipal election, I expanded points 1 and 2 above by introducing my proposed approach to financing our social housing sector.  My plan centered on partnering with one or more of Ontario’s public sector pension funds to:

  • secure the necessary capital to restore our current housing stock and build new stock,
  • expand operating resources and improve outcomes,
  • minimize the demands on our increasingly strained municipal debt structure,
  • mitigate any potential negative impacts to our city’s AAA credit rating.

The proposed plan is actually quite simple in construct. London would use its Housing Development Corporation to take a minority stake in a joint venture with a large pension fund.  The partnering pension fund would provide capital to the new entity while the city would continue to contribute operating funds.  The City would commit both its existing social housing stock to the new joint venture, as well as a long-term annuity payment to the new entity to ensure that its primary shareholder, the pension fund, secures for its members a competitive return.  The joint venture entity would then be free to restore existing properties and underwrite the development of new ones.  London benefits by securing the necessary capital to replenish its housing stock without having to increase its debt capacity, and pension fund members benefit from a long-term, guaranteed return.

More importantly, the tax impact to Londoners would be far less than if the City decided to self-finance, and considerably lower than the cost of doing nothing.   As I outlined in my “London’s Underground” series, the financial impact of homelessness on London taxpayers is significant (est. $50,000 annually) and unending if we do not do something to address it.

Furthermore, the City would benefit from ready access to patient capital, seasoned management and professional governance. Tenants would benefit from a substantial improvement in their housing options and support services.  Pension fund members would benefit from a steady financial return and the knowledge that they are helping to rebuild our communities.

Fortunately, Ontario is home to some of the largest, best-performing pension funds in the world, including the $190 billion Ontario Teacher’s Pension Fund and the $98 billion Ontario Municipal Employees Retirement Fund.  Both funds have demonstrated a willingness to take a long-term perspective in their investment approach, and have often pursued new investment initiatives that include an element of social good.  For example, the Ontario Teachers fund recently announced a partnership with Google-subsidiary Sidewalk Labs to co-invest in infrastructure that improves the efficiency and effectiveness of urban environments.

London has an opportunity to play a leading role in the transformation of not just our housing stock but how we finance our future infrastructure needs.  Today’s proposed restructuring of our housing support model is a good first step. However, none of it will matter if we do not immediately and relentlessly follow up with action on the housing problem itself.

After all, the only way to address the “elephant in the room” adage, continues to be “eat it one bite at a time”.