Construction costs and interest rates drive up affordable housing prices

Ottawa’s planning committee is setting aside up to $13.3 million in a contingency fund to stabilize projects already under construction

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Skyrocketing construction costs are eating into the city’s investment funds for affordable housing.

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The planning committee on Thursday backed an annual spending strategy that allocates up to $13.3 million in an emergency budget to stabilize affordable housing projects under construction.

This is in addition to $10 million for a 270-unit Ottawa Community Housing project at 818 Gladstone Avenue and $7.2 million for Nepean Housing Corporation to create 31 affordable housing units on its Dunbar property. Short. Construction on both projects is expected to begin later this year or early next year.

It is a “two-pronged” financing plan – adding to the supply of new affordable housing and stabilizing projects currently under construction – necessitated by “the impact of steep increases in residential construction costs experienced by our nonprofit housing partners over the past two years,” staff explained in a report ahead of Thursday’s meeting.

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These partners were reporting cost increases of 25-35% in the fourth quarter of 2021, compared to the start of 2020, according to staff, following pandemic disruptions to work and supply chains. Staff set aside a $4 million emergency affordable housing fund last year to meet these rising costs, which has been fully allocated. Money from the $13.3 million fund for 2022 could also be used for strategic property acquisition by nonprofit housing providers, something the city has supported on a small scale for several years.

Projects that are underfunded include 494 Lisgar Street, a 29-unit supportive housing project for women from the John Howard Society of Ottawa, which has been cut from $13.9 million to 17 $.4 million, and the Hollyer House development in Bells Corners, which is facing an estimated budget shortfall of $500,000.

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Staff expect many ongoing projects to be in the same boat, and said opportunities to share cost overruns with other levels of government “are encouraged where possible.”

Rising interest rates have also been identified as a factor likely to drive up the price of building new affordable housing.

  1. Housing Minister Ahmed Hussen, the Most Reverend Shane Parker, Bishop of the Anglican Archdiocese of Ottawa, City Councilor and Housing and Homelessness Liaison Catherine McKenney, and Nepean MP Chandra Arya gathered for an announcement regarding an affordable housing development in Bells Corners by the Anglican Archdiocese of Ottawa.

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  2. Ottawa City Councilor Catherine McKenney says there is nothing

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There are currently 1,346 units in the pre-development, planning or construction phase, between OCH and other affordable housing providers the city works with. Housing Services Director Saide Sayah told the committee that it could take another $60 million to $100 million to realize the creation of these units, but there are many unknowns. This cost could be shared between the different levels of government.

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The city has a 10-year housing and homelessness plan and an associated long-range financial plan that outlines what is needed to achieve the city’s affordable housing goals. This plan was approved in 2021 and will be updated in 2023, staff reported, so the new board can consider the impact of the changing construction environment on cost estimates and needs. of financing.

While the 2022 capital spending plan will support the construction of at least 300 new affordable housing units, according to Affordable Housing Manager Lauren Reeves, staff also noted in their report that it “will not produce the number of units it would have two years ago. ”

Staff also proposed a capital fund allocation of $2 million for a private sector pilot project that would make funds available to developers in exchange for relatively affordable rental units.

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City funding can help developers when they approach Canada Mortgage and Housing Corporation for funding under its National Housing Strategy programs, and demand is already high.

“We literally have developers knocking on our door quite frequently, asking us to partner with them,” Sayah said.

The pilot project would include a request for proposals, developed in consultation with CMHC, with staff proposing a level of unit affordability of at least 80% of average market rent (AMR) for developers to qualify, and that this level is maintained for at least 30 years.

Capital County Shawn Menard dissented on this element of the proposed capital expenditure strategy, sharing his concern about taking “very valuable capital dollars out of non-profit, non-market housing” and offering them to developers. for-profits, which he says are less likely to sustain their initial affordable rental supply in perpetuity.

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Richard L. Militello