Public Housing For Sale?

What happens if the UCP government privatizes low income housing

By Ximena Gonzalez

Many Albertans are publicly declaring their opposition to the conservative policies and budget cuts of the UCP government. But as lawn signs defending provincial parks, healthcare and public education pop up across Alberta, a looming threat to public housing has remained under the radar. Indeed, in Alberta, where property ownership is the norm, few advocate for public housing—that is, housing owned by the government and rented below market rates to people with low incomes. “People have many misconceptions about people who live in subsidized housing,” says Christina, a public-housing tenant who requested her last name be withheld. “But a lot of the people who are in subsidized housing, they’re working people—they have jobs, they’re paying taxes, but they’re not making enough to afford regular housing.”

Christina lives in Edmonton with her two adult sons, both of whom were diagnosed with a disability when they were children, and she’s their sole caregiver. Trained in disability studies and social work, Christina hasn’t been able to practise since 2004, when she was diagnosed with severe arthritis. “I would have worked longer if I didn’t have my own health issues,” she says. “I really enjoyed helping people.”

Single and in too much pain to work, Christina keeps her family afloat thanks to public support. With her sons now over 18, all three family members receive Assured Income for the Severely Handicapped (AISH), and they qualify to live in public housing. “I’ve never been in the position to just move out into regular housing,” she says. “With both of my boys, my health getting worse, and then being on AISH—I’m just living a life of poverty.”

Christina lives in Dickinsfield I, a public housing complex built in 1971 in north-central Edmonton that’s owned by the province and managed by Civida, formerly Capital Region Housing Corporation, one of more than 100 Alberta housing management bodies. For two decades Dickinsfield I has allowed Christina to provide her children with a stable place to live despite fluctuations in her employment status and health. All provincially owned social housing is based on a rent-geared-to-income (RGI) model; Christina has consistently paid one-third of her income in rent. She currently pays $865 a month, which she finds reasonable for a 938 ft2 three-bedroom townhouse. On average, a similar unit in Edmonton rents for $1,389.

But now the UCP government could be putting Christina, and 26,700 other Alberta families who live in public housing, at risk of homelessness. Despite the vital role public housing plays in the well-being of low-income Albertans, the conservative leadership of our province seems to view public ownership of affordable housing as an unnecessary expense.

“Alberta’s affordable housing system must be financially sustainable and able to address growing demand,” said Minister of Seniors and Housing Josephine Pon in July 2020. The minister appointed a review panel to develop a “new vision” for our province’s affordable housing. “This review is the foundational piece of our housing transformation,” she said. Chaired by Calgary-Cross MLA Mickey Amery (UCP), the review panel was comprised of developers such as Paul Boskovich of Genstar, rental property owners such as Sam Kolias of Boardwalk, former PC MLA Jeff Johnson, a U of C urban planning professor, a former provincial deputy minister and a representative of a housing managing body—that is, an entity tasked by the Alberta Housing Act with the management and operation of publicly owned housing.

Providing public housing to low-income Albertans is a fiscal challenge. As it’s based on an RGI model, public housing doesn’t produce enough revenue to cover operational and maintenance costs. Meanwhile, decades of government underfunding has meant worsening maintenance issues. According to Steve Pomeroy, an independent housing researcher and consultant based in Ottawa, funding started to shrink when the federal government in the 1990s ended programs that supported social housing across Canada. In 1996 they handed over public housing stock to the provinces. Bilateral operating agreements left provinces in charge of maintaining and operating the existing stock.

Including the 26, 700 provincially owned units, 61,000 households live in subsidized housing in Alberta, whether it’s owned by the province, municipalities or non-profit organizations. Currently, around 19,000 households are on the waiting list for social housing. This number is only expected to increase as Alberta’s population continues to grow. And “with the current economic crisis, we’re going to see more homelessness,” says Nick Falvo, a Calgary-based research associate of the Canada Centre for Policy Alternatives who specializes in affordable housing and homelessness.

Alberta has less subsidized housing than other parts of Canada have. Subsidized housing represents 2.9 per cent of the province’s overall housing units, while nationally the figure is 4.2 per cent. In a historically conservative province, the share of the provincial budget earmarked for capital investment in affordable housing has been in steady decline for more than three decades. And what housing does exist is sometimes in rough shape. Today 8 per cent of the public housing stock in Alberta is deemed to be in poor condition (up from just 2 per cent in 2015–2016).

According to Canadian Mortgage and Housing Corporation data, in 2016 some 11.4 per cent of Albertan households were in core housing need. Core housing need, explains Pomeroy, refers to “households that spend more than 30 per cent of their income on shelter and live in overcrowded conditions or in dwellings in need of major repair.” Lone-parent households such as Christina’s, as well as seniors and immigrant renters, are twice as likely to live in a home that’s too expensive, too small or too rundown.

While Christina’s three-bedroom townhouse in Dickinsfield I is affordable and provides enough space for her and her sons, it needs repair. “I have the original everything,” she says, noting that her unit hasn’t been upgraded since she moved in two decades ago and some maintenance problems have gone unattended. “The paint is split and bubbled up, but when you touch it it’s dry,” she says about her kitchen’s ceiling. When the most recent annual inspection took place, “they checked it out and said ‘Call us when it’s leaking.’” Her unit still has the original flooring from the 1970s. “The linoleum is chipped and cracked and we’re tripping over it,” she says.

The case for affordable housing is clear,” the Alberta Affordable Housing Review panel’s October 2020 report read. “Albertans need safe, suitable and affordable housing to participate successfully in the economy and society.” The panel, however, argued for changes to who provides such housing. And experts predict this shift will ultimately make housing in Alberta less affordable.

The panel came up with 19 recommendations that can be summarized in three categories: additional “modest” rent subsidies for low-income Albertans, a shift towards mixed-income housing and a transfer of publicly owned assets to non-profit and for-profit entities. “The government’s fiscal challenge requires that it reassess its return on investment in affordable housing and identify a new role for the provincial government in meeting the need for affordable housing with scarce resources,” reads the report.

Under the pretext of “fiscal challenges,” the panel suggests ownership of public housing be transferred to non-government entities, with the province becoming a facilitator of “growth and investment.” In short: the privatization of all public housing in Alberta. Rather than being the owner of a significant share of the housing stock, the province would be limited to cutting “red tape” and “building sector capacity”—giving capital grants to non-profit and for-profit housing providers. “We are committed to reducing government red tape by one-third,” said Minister Pon during a legislature debate in March. “This will save, time, money, resources and make it easier for Albertans to access… affordable housing services.”

According to the panel’s report, an “asset transfer”—a one-time sale of public housing—would “create more flexibility and financial independence for housing management bodies and other housing operators,” and “leverage assets to better address the affordable housing needs in their communities with innovation and creativity.” (The government procured an asset review, including inventory and evaluation of all public housing stock, by Colliers International in February 2021.) Details on what this sale might look like are to be fleshed out in a plan contracted to PricewaterhouseCoopers. Minister Pon tweeted in late September 2021 that she would release the plan to the public by the end of October.

One of the UCP panel’s rationales for selling public housing is that existing public managing bodies can’t access private capital for much-needed upgrades and maintenance. Pomeroy says, “Transferring the asset to a community non-profit can actually create the capacity and the flexibility to access financing with little or no government subsidy.” But even if housing upgrades were to become easier, an asset transfer likely won’t help many low-income Albertans, especially when for-profit entities are part of the mix. “The biggest problem with the for-profits is that they generally seek to keep rents as high as possible,” Falvo says. This is particularly so for real estate investment trusts (REITs). “Whenever they can increase rents, they do. And they’re often required to do that for their shareholders as a fiduciary obligation.”

In their 2016 book In Defense of Housing, David Madden and Peter Marcuse write that “firms purchase buildings on the assumption that rents can be doubled, tripled or more… displacing low-income tenants.” Madden and Marcuse define financialization as a process in which “managers, bankers and rentiers produce profits from real estate through buying, selling, financing, owning and speculating.” And while this practice isn’t new, the rise of global REITs in the last two decades has accelerated a process that facilitates the flow of profits and revenues to investors rather than to the production of new housing.

According to Pomeroy, “A piece of property isn’t necessarily an asset; it’s only an asset if it has positive cash flow. If it’s got an ongoing operating deficit, it’s a liability.” To successfully transfer a “non-viable” asset, then, the transfer must exclude the low-income folks who make the asset a liability, he says. “You can’t transfer the asset with a whole bunch of people living in the property who are paying really low rents and creating an unsustainable, unviable liability.” To mitigate this risk, that’s where rent subsidies come in.

IN 2020, 2,085 CALGARY HOUSEHOLDS received a rent supplement from the Calgary Housing Company (CHC), whose average monthly subsidy is $707 per unit. Rent supplements are the CHC’s third-largest expense, after maintenance and staffing. The UCP panel recommended that the provincial government likewise offer “modest subsidies for people who are not able to access deeper subsidy programs.”

But while the City of Calgary spends nearly $20-million per year in rent subsidies, for-profit organizations such as Boardwalk boast high revenues. Sam Kolias, a member of the government review panel, is founder and CEO of Boardwalk, which became a REIT in 2002. Boardwalk owns 33,033 rental units across Canada and 20,764 in Alberta. In 2020 the company generated a total rent revenue exceeding $465.6-million—2.3 per cent higher than the previous year.

Catherine, who requested her last name be withheld for fear of losing her housing stability, is a senior Calgarian living in a rent-stabilized unit in Patrician Village, an apartment owned by Boardwalk. She pays $285 a month for the one-bedroom where she’s lived for 20 years. The market rent of a unit like hers is between $1,199 and $1,269, according to Boardwalk’s listings, but the rent supplement provided to her by the CHC covers the difference between what she can afford (one-third of her income) and the rate determined by the landlord. This subsidy has allowed her to remain housed.

In theory, a for-profit housing provider such as Boardwalk would ensure its assets are efficiently managed and well maintained because, unlike bodies in charge of public housing, it can leverage its assets to access funding. But the maintenance issues Catherine faces at Patrician Village (built in 1977) are much like Christina’s in Dickinsfield I. While Catherine’s unit has received a few cosmetic upgrades since she moved in two decades ago, her building too is aging. “The windows and balcony doors really need to be replaced; they leak,” she says.

Christina also notes deficiencies in the HVAC system, which Kolias says has been upgraded in the last eight years as part of the $10-million the company has spent on renovations and repairs of the building since 2014. One notable upgrade was the renovation of Patrician Village’s “experience centre,” which Boardwalk characterizes as a “value-add investment.” It increased tenants’ rent by $10 and produced a yield of 44.4 per cent for shareholders. For Catherine, though, little value was added. “I think they regard these rental units as a cash cow and do as little as possible,” she says. Pomeroy explains that the way for REITs to drive yield for investors is to reduce expenses and increase revenues—at the expense of tenants.

 Mixed income model comes without public subsidies and combines an array of income brackets in a single building. Middle- and higher-income tenants pay a higher rent to subsidize lower-income households. “With social housing, [government] subsidies are paid for by taxes—everybody who works contributes, and it gets redistributed to support low-cost housing development,” says Sarah Cooper, an assistant professor of city planning at the University of Manitoba. “When you no longer have these subsidies, then you’re looking to the neighbours to pay this direct subsidy to support someone else in their building.” In other words, support for the operation and maintenance of affordable housing no longer comes from the province (i.e., all citizens) but from the market (in this case, other tenants). And renters on the whole are not an affluent demographic.

Yet, for the UCP panel, this appeared to be a fair trade-off and “an opportunity… for creating revenue models to support sustainability.” The panel was silent on whether a mixed-income model would be required of private housing operators; it recommended only that providers be “supported and encouraged” to have such a mix. Their report cites benefits they believe the mixed-income model offers residents, such as a stronger sense of community, more choice and less reliance on government supports.

Despite the alleged financial and social benefits of a mixed-income model, a transition from public housing to a mixed-income model would jeopardize the stability of current public housing tenants, as a development consisting solely of RGI units like Dickinsfield I in Edmonton is unsustainable. “If you have 100 per cent subsidized units—and you’re not getting any [public] money—you have to raise rents and people will have to find a new place to live,” says Cooper.

“The motive in the private sector is the antithesis of the notion of affordability,” says Pomeroy. If the province sells public housing units to Boardwalk, for example, “they [would] continue to be affordable for a couple of years. But every time the unit turns over, Boardwalk is going to jack the rent and maximize the returns they’re getting. Five years from now, none of those units will be affordable anymore.” Kolias disagrees. “We have publicly stated on our website our commitment to continue to provide affordable housing and to continue to self-regulate ourselves,” he says. Yet it remains unclear what affordability means for a REIT whose board’s raison d’être is “to achieve the best long-term interests of Boardwalk and the enhancement of value for all security holders.”

Fixing several decades of slow decay would be expensive. Given low provincial funding, housing management bodies across the province already scramble to maintain safe living conditions for tenants—as witnessed by the letters some of these organizations submitted to the review panel.

“Compared to going out and building new,” says Pomeroy, subsidizing the operation of older buildings “is still a relatively cheap way to help low-income people.” With a median building age of 35 years, a portion of public housing in Alberta could still be viable with proper government support. “There’s a fiscal imperative—as well as a moral imperative—on the province to preserve that existing stock,” he says.

If the UCP government instead chooses to sell public housing to the private sector, the political cost could be high. “The political risk is what might hold the government back,” Pomeroy says, “notwithstanding their desire to generate an immediate cash receipt for those assets.”

But Pomeroy may be overestimating Albertans’ priorities. One of the reasons public housing has deteriorated in Canada since the 1990s is the lack of pressure on the government to adequately fund social housing. And underfunding creates a vicious cycle. According to Cooper, public housing “is often a lousy place to live because it hasn’t been well maintained, because there’s a concentration of poverty, a concentration of social problems, and very few supports are in place to help the community move out of poverty.”

Only pressure from citizens will secure the long-term sustainability of public housing, ensuring all Albertans can find a place to live that fits both their needs and their budget. The alternative is more homelessness. “Without the province funding housing for low-income people,” says Falvo, “we’re in a lot of trouble.”

Christina worries about the possibility of losing her housing altogether. “I have no idea what I’d do,” she says. “There aren’t other units to go to. Waiting lists are years and years long.” The current wait-list in Edmonton alone is about 6,000 people. And she’s not confident that this government will think critically about its panel’s recommendations. “This premier is not here to actually make things better for people—people are not important.”

Ximena González is a Calgary freelance writer and editor whose work has run in The Tyee and The Sprawl.

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