The most common challenge found across the projects was navigation of complex financial structures to create a financially feasible project. The report demonstrates this by stating, “Constant negotiation and compromises were necessary to leverage land values, transfer ownership, and layer multiple sources of financing from government and private entities … One might say developers achieved mixed models in spite of government, not because of government” (Curley, Gress and McKinney 2020, 39).
Some of the developments had unanticipated construction costs that depleted contingency funds. Post-construction, long-term sustainability was also sometimes threatened due to a lack of operating funding. Rent revenues must cover a number of operational costs, which include maintenance, utilities, property tax, and mortgages.
Regulatory & Policy Framework Challenges
Property taxes can be prohibitive for some providers. If a housing provider is not registered as a charitable organization, oftentimes it must pay full property tax fees as if it were a market landlord. The inclusion of market units, partnerships, and unique financing models often make providers ineligible for tax exemptions. Property taxes present a significant operating cost to the housing providers, threatening the viability of the projects.
The majority of the projects needed multi-sector collaborations to successfully fund construction. Private partners offered out-of-reach financing for non-profit and charitable developers and in return received access to land needed for market units. A downside of these types of partnerships is their complex nature of the partnerships, requiring a layering of financing from multiple programs and a high degree of cooperation.
Leveraging Development Assets
The developers had to use a variety of strategies to leverage existing assets, such as: “brokering affordable land leases and purchases; increasing site density on land assets; upgrading existing affordable units where possible instead of pursuing wholesale demolitions; and off-setting operating costs with the addition of new market units to existing buildings” (Curley, Gress and McKinney 2020, 42).
Varied Focus on Social Dynamics and Outcomes
Although a common goal of mixed model housing is to challenge social exclusion and provide inclusive communities, the report found that social goals were not being measured by the housing providers. While some groups included design aspects in their properties and others spoke openly about the mixed-income nature to all prospective tenants, there was a lack of on-site programming and/or data collection to measure how successful the providers were in achieving social inclusion. “Thus, there is no way of truly knowing whether mixed model housing in the sample is leading to positive social outcomes aside from ensuring residents have an affordable place to live” (Curley, Gress and McKinney 2020, 44).
Congress Session Q & A
Building upon the report findings, the CHRA Congress session opened with Claire and Alexandra offering a brief presentation of the report and Ray and Stephen providing background on their respective organizations, CCOC and AHS. The session then turned to a Question-and-Answer format.
The panelists were asked if they were concerned about communities becoming polarized due to the growing gaps between rent levels (real market rent to Average Market Rent (AMR) to deeper levels of affordability, including Rent-Geared-to-Income (RGI)). Panelists confirmed this was a concern. The increasing gaps make it hard to balance pro formas. It becomes uncomfortable when there are no “middle” rents, only market and deeper levels of affordability. It was noted there is a market-based accountability with mixed-income housing. CCOC’s tenant satisfaction surveys demonstrated no discernable difference in satisfaction with services between the different income levels. That market tenants choose to stay is evidence that the housing provided is of quality for all tenants.
When asked what marketing strategies are used for new developments, Ray responded that CCOC is open and proud of its mixed-income model. CCOC does group lease signings that include all tenants. Stephen noted that it is in AHS’s name, so the organization is also very open. Sometimes having ‘Affordable’ in its name is a challenge for AHS, particularly when market tenants have rent increases because it does not appear affordable. Claire noted Calgary Housing is open, but does not go to the extent of CCOC as offering the income mix as a selling point.
Panelists were asked about challenges encountered from working with private developers. Stephen had an example of when a private developer saved money by choosing lower quality finishes for the lower rent units that AHS was to purchase and operate. This was a lesson for AHS because ethically and practically, they wanted the same quality of units no matter the rent level. Claire noted Calgary Housing often chooses higher standards of quality because it needs to be durable and energy efficient. CCOC’s principle is that the tenancy is subsidized, not the unit. All units are the same and allow for flexibility of people and subsidy moving as needed. CCOC wants their housing to be operated for 100+ years, so it also needs to be of high quality.
When asked about AHS’s partnerships with supportive service providers, Stephen responded that some partnerships are formal while others are informal, dependent on the situation. Some service providers come to the units to offer services, such as those supporting people living with HIV/AIDS. Other groups focus on supporting refugees, or victims of domestic violence.
An audience member inquired whether it is fundamentally problematic to base rents on the market. Ray noted there is both a social and business model to mixed-income housing. On the business side, market rents are helping subsidize the below market rents. CCOC uses CMHC AMR to set their market rent rates. Therefore, the average market listed apartment rent rate is actually 20-30% higher than CCOC’s. So, although it is called “market rent”, is it still often lower than what is available from for-profit landlords. Offering 100% of units at RGI would exclude households with higher incomes and be nearly impossible to administer. Stephen added that AHS is operating to be self-sustaining with as little government funding as possible, therefore higher-level rents are necessary. The market is used as a guide in their pro formas to make viable projects.
A second audience member asked if we are giving up too much to make mixed model projects work. Claire responded that Calgary Housing has noticed that if their new development only has 30% low rent units, they will need to build three times as much housing. Stephen said AHS’s Board would not accept a redevelopment project that does not fully replace the low rent units. Therefore, AHS tries to leverage density to increase the number of units. His key takeaway is to “build, build, build” any type of affordable development.
When asked for tips to convert existing deeply affordable housing to mixed-income, Claire offered that if the development is in a good location, appealing, and well-maintained it will attract market rent tenants. Ray noted that the availability of government subsidies is important to create a mix as it is difficult for CCOC to subsidize units itself.
Alexandra asked the other panelists if the moment of racial reckoning seen in 2020 resulted in a shift in communities and/or organizations. Claire said Calgary Housing only collects data necessary to provide the unit, therefore they do not collect data on race unless supports are needed for the unit. They are in the early stages of their anti-racism journey. CCOC also sees racism as a housing issu, CCOC staff and volunteers began an organizational anti-racism change process in 2019. Both Calgary Housing and CCOC’s anonymous tenant surveys collect information about racial identity.
The session ended by asking for key elements of mixed model housing that would convince the government to support the model. The panelists responded with five points:
- It is less expensive for government;
- There are statistics that demonstrate cost savings;
- The government can play a smaller, less active role;
- Mixed models are effective at contributing to positive outcomes for residents; and
- It offers stable housing by de-linking the unit subsidy from the tenancy.
Final takeaways from the report and discussion are:
- Mixed model housing balances higher and lower level rents in the same building, contributing to the financial viability;
- The model offers potential to contribute to positive social outcomes;
- All units should be developed with the same design and quality standards;
- More data should be collected to measure social outcomes;
- Some properties owned by non-profit housing providers have property tax comparable to for-profit properties, making projects less viable;
- Partnerships are key to success, but bring complexity;
- The National Housing Strategy (2017) pushes for more mixed model housing; and
- Canada’s housing sector is in the early stages of its mixed model journey.
Curley, Alexandra, Taryn Gress, and Sherise McKinney. “Canadian Mixed Model Development: A comparative analysis of ten sites.” Housing Partnership Canada (2020). https://www.housingpartnership.ca/s/CanadianMixedModelDevelopmentComparitiveAnalysis_FinalReport_0129.pdf