The County is extending a line of credit to its Affordable Housing Corporation capped at $5 million.

Voting 9 to 5 in favour, Council approved the line to get its foundering affordable housing projects ready for construction.

It also designated proposed developments at Niles Street in Wellington and Disraeli Street in Picton projects of community interest, making them eligible for donations from developers and residents.

The County created the Affordable Housing Corporation in 2019 and secured the property at Niles Street. “Yet at this point, effectively, we’ve done nothing,” said the Mayor.

 “We keep saying affordable housing is our first priority.”

The line of credit will cover remaining pre-construction costs to get both projects ready to apply for funding from CMHC and send out for construction tenders.

Director of Housing Adam Goheen noted, “we will not spend any more than we need to get tender-ready, which means several hundred thousand, not millions, of dollars.”

The last appraisal of building costs estimated the Niles street project at $16-20 million to build and $450,000 in pre-construction costs. Disraeli was costed at $3.9 to 4.4 million to build and $250,000 in pre-construction costs.

“We are drawing down only what is needed to move forward, only what is necessary to get shovels in the ground.”

“In the meantime we are working all avenues for funding, the CMHC, first, and co-investment opportunities. We would then roll the balance into a long-term construction loan and eventually pay down the loan with revenues.”

Multiple councillors noted it is impossible to get funding if you do not already have it.

Councillor Brad Nieman, who sits on the Board of the Housing Corporation, noted, “this gets us to where we can start having revenue come in. If you can show you have income coming in, your opportunities for funding increase.”

The move comes in the wake of an application for federal accelerator funding that was turned down.

“We will continue to press the province for funding for Disraeli, and the federal government for funding to purchase outright the Queen Elizabeth school property,” said Mayor Ferguson.

“We may have lost the battle but we have not lost the war.”

Creative Solution

The line of credit is a novel solution to the problem of a lack of startup funds, not without precedent in larger municipalities. It incurs lower risk and expense than having the Corporation seek bank financing, which would come at a higher interest rate.

This way the County earns a modest rate on its cash reserves.

In the unlikely scenario that the Affordable Housing Corporation defaults on the loan, the County would take over the properties it holds — not a bank.

“This is a draw down on a limit of $5 million — not just a blank cheque,” said Mr. Goheen.

“Any funding that is forwarded comes with oversight, that of staff, the Corporation’s Board of Directors, and of Council.”

Councillors Braney and Engelsdorfer were not convinced. They moved to delay the project to seek better solutions, ideally involving private developers.

“If we were to hold off and wait and try to market this concept to the community, are there developers who mightwant to jump on board and assist?” asked Councillor Braney.

“We have to face reality,” said Councillor St. Jean, who chairs the board of the Housing Corporation. “Developers do not do anything for free. We have been actively seeking P3 partnerships, but as you know, private investment looks for a profit — and then the project is no longer affordable.”

“It’s not the most viable or realistic option.”

The motion to defer lost 9 to 5. Councillors Braney, Englesdorfer, Harrison, Pennell, and Prinzen voted to defer, and when that failed, voted against the motion to extend a line of credit to the Housing Corp, which passed 9-5.  

“Housing is number one on our agenda,” said Councillor Kate MacNaughton. “It’s critical. We needed to do this five years ago. Putting it off doesn’t serve anybody in this community. It is forcing people to migrate out, and that is not recoverable for families or individuals. The risk of not undertaking this is much greater than any risk we undertake in extending a loan — and on that score this has been well thought out.”

The Affordable Housing Board’s first priority is Picton’s Disraeli Street property, as it is the least expensive to get to tender and to build.

“It’s a smaller project to get ourselves going,” said Mr. Goheen.