Recently, my partner and I invested just under $1 million to purchase a beautiful ranch-style bungalow that we converted into long-term affordable “home share” housing for seniors in Peterborough, Ont. The project has struggled and could possibly fail because of many surprisingly unlikely entities that contributed significantly to making the project unaffordable.
Statistics Canada’s 2016 Census Profile reported that more than one-third (36.3 per cent) of Peterborough’s population is over the age of 55.
Our rent is $950 to $1,095 for a private bedroom and shared common areas. Every amenity needed in a home plus housekeeping services are included. Retirement homes, while offering more services, average $6,000 per month. Our tenants pay the property’s operational expenses, which means their rent can decrease when they employ best practices for utilities consumption. I’m unaware of any other Canadian landlord who offers such a self-sustaining opportunity.
Eight building insurance providers wouldn’t insure it because it’s seniors co-living. Four companies quoted a premium three times higher than when the property was insured as student housing. The lowest quote was twice the original premium.
Every mainstream lender refused to provide financing because shared living among seniors was too risky. One bank vice-president told me most banks don’t provide financing for any type of affordable housing.
Private lenders demanded four times higher interest than mainstream residential mortgage rates.
Three times we contacted the Peterborough mayor’s office to ask for assistance in spreading the word. No reply, despite Mayor Diane Therien’s 2019 10-point plan to build 2,000 affordable housing units by summer 2021. Peterborough Housing reported that the current waitlist for subsidized housing is nine to 12 years.
Two CMHC program managers who oversee programs to foster thinking-outside-the-box innovative affordable housing solutions said our solution didn’t fit within their (inside-the-box) program guidelines.
We contacted many local and regional housing agencies: YMCA, YWCA, Red Cross, Salvation Army, several places of worship, municipal housing, Canadian Mental Health, Brain Injury Association, Trent Centre for Aging & Society, Activity Haven for seniors, Peterborough Sport and Wellness Centre for seniors and a slew of other agencies. None offered to promote our housing availability to their constituents. Three said they can’t work with “for-profit” entities. The government agencies wouldn’t allow even paid advertising to spread the word.
One bright light shone from two ladies from Age-friendly Peterborough, who actively embraced the project and referred applicants to us. Our one monthly classified print ad yielded many more seniors responses than all our online initiatives.
Infrastructure Canada reported there were 252,450 total social and affordable housing units in 2016. Statistics Canada’s 2017 Dwellings in Canada reported that 6,529,445 (46.4 per cent) occupied private dwellings in Canada were rental units out of a total 14,072,080. The private sector therefore has built 26 times more housing than the government. With the largest debt in Canadian history and multi-billion dollar debt-relief programs, government won’t be building more housing anytime soon.
Many of our applicants didn’t want “affordable” housing. They wanted to age-in-place with dignity and comfort in an all-inclusive downtown rental unit close to all amenities and pay rent equal to what the government support programs provide – perhaps $750/month. They effectively wanted free housing, and the agencies looking to house them are looking for the same thing.
The annual operational costs of our property is roughly $40,000 before tenant best-practices. Divided by eight tenants = $415/month. Conventional 70 per cent loan-to-value financing, 25-year amortization, with four-per-cent interest is about $390/tenant/month. That $805 doesn’t include capital costs or a return on investment for providing the “affordable” housing. Ten tenants make the property a highly attractive investment.
Many pundits and government spokespeople say residential owner-occupied and investment housing prices will drop. Not a chance. Housing prices and rents will continue to rise despite mortgage defaults and rising unemployment because:
- No reduction in property taxes and development charges
- Three to five-year approval times
- Hefty fees-in-lieu of park lands
- Costly government-mandated plans, studies, red tape
- Brutal anti-landlord tenancy legislation
- Unjust landlord-targeted municipal bylaws
- Policies like the landlord responsibility to “accommodate to the point of undue hardship”
- Failed Landlord and Tenant Board, multi-year backlog of applications
- Nine to 12-month rent-free evictions backlog costing arguably a half-billion dollars in lost rental income
- Government licensing fees for housing
- Double-digit increases in construction labour costs and materials, especially glass, concrete and steel
- A critical shortage and decreasing number of construction labourers
- A flood of investors wanting real estate hard assets versus volatile and unstable stocks
- Low bank and bond ROI rates, decreasing dividend-paying stocks
- Media and government hype for self-serving reasons that promote tenant-landlord tensions
- Rapid increase in people working from home increasing infrastructure and municipal services costs
- Overarching demand that far outpaces supply
- Decades of government failures to encourage housing construction
- Determined homeowner wannabees placing multiple offers
Countries like China and India, which have suffered housing shortages for decades, have long included home share, co-living, rooming houses, roommates and other forms of shared housing in their standard housing options.
Until the government properly incentivizes the private sector, which is the ONLY group that can solve the housing crisis, and the government cleans up their own “house,” affordable housing in urban and suburban centres will be a fleeting dream for an ever-increasing majority of people.