To: From: City of Kingston Information Report to Housing and Homelessness Advisory Committee Report Number HHC-16-011 Resource Staff: Date of Meeting: October 13, 2016 Subject: Chair, Housing and Homelessness Advisory Committee Lanie Hurdle, Commissioner, Community Services Sheldon Laidman, Director, Housing & Social Services Affordable Housing Secondary Suite Grant Funding Level Review Executive Summary: In March, 2013, the Housing and Homelessness Advisory Committee considered Information Report Number HHC-13-009 which outlined draft amendments to the City s Capital Investment in Affordable Housing Program. The amendments would enable program funding to be provided in the form of a forgivable loan to support the development of secondary suites. At the August 2013 committee meeting, City staff presented the recommended Secondary Suite Grant Program (Report Number HHC-13-012) and the associated amendments to the Capital Investment in Affordable Housing Program that were based on the outcomes of the committee s discussions at the March 2013 meeting. Since Council s approval of the program, City staff have continued to deliver the program by providing information to interested homeowners which has resulted in eight funding commitments being provided. The following report gives an overview of the grant program and experiences delivering the program to-date. This report directly responds to the Housing and Homelessness Advisory Committee s request for an information report to be provided, considering the appropriateness of the funding level available under the secondary suite grant program. Recommendation: This report is for information purposes only. 76
Information Report to Housing & Homelessness Advisory Committee Report Number HHC-16-011 October 13, 2016 Page 2 of 5 Authorizing Signatures: Lanie Hurdle, Commissioner, Community Services Gerard Hunt, Chief Administrative Officer Consultation with the following Members of the Corporate Management Team: Denis Leger, Commissioner, Corporate & Emergency Services Not required Jim Keech, President and CEO, Utilities Kingston Not required Desiree Kennedy, Chief Financial Officer & City Treasurer Not required 77
Information Report to Housing & Homelessness Advisory Committee Options/Discussion: October 13, 2016 Page 3 of 5 Report Number HHC-16-011 On March 7, 2013, the Housing and Homelessness Advisory Committee considered Information Report Number HHC-13-009 which outlined the draft amendments to the City s Capital Investment in Affordable Housing Program. The amendments would enable program funding to be provided in the form of a forgivable loan to offset costs associated with the development of a secondary suite. In exchange for the funding, the homeowner would commit to renting the suite to an income qualified household at an affordable rate (80% of the CMHC Average Market Rent) for a specified period of time. The draft amendments to the Capital Investment in Affordable Housing Program to implement a secondary suites grant program outlined two funding streams including: 1) Municipal Fee Rebate Program providing forgivable loans to projects within areas of the City where Planning applications are required including zoning by-law amendment, minor variance or removal of holding symbol in an amount equivalent to the applicable municipal application fee; and 2) Secondary Suite Affordable Housing Grant providing forgivable loans to homeowners who commit to creating a secondary suite while maintaining an affordable rental rate to income qualified households for a minimum five year period. The information report included a review of other municipalities that had implemented a secondary suites grant program including funding levels and general program requirements. Based on the review a maximum capital contribution of the lesser of 75% of development costs or $20,000 was considered. Discussions amongst the committee supported the establishment of the funding program and general program requirements. The main revision to the proposed program resulting from the committee s discussion was to reduce the maximum funding available under the capital grant from $20,000 to $15,000 and to require projects receiving the Municipal Fee Rebate Program to meet the affordable rental rates and income eligibility criteria for a minimum one year period. These directions were incorporated within Report Number HHC- 13-012 which recommended the proposed secondary suites grant program and the supporting amendments to the Capital Investment in Affordable Housing Program policy. Additional details regarding the program s implementation requirements are provided in Exhibit A Secondary Suite Affordable Housing Grant Program Guideline. Since the establishment of the program, five homeowners have completed projects and received funding. Three conditionally approved projects are currently in the development stages with funding to be provided upon completion of construction, proof of tenancy compliant with the housing affordability requirements, and execution of the funding agreement. Exhibit B Secondary Suite Program Uptake Summary, provides a summary of the program allocations and commitments provided to-date. At its June, 2016 meeting, the Housing and Homelessness Advisory Committee requested staff to report back to the Committee in Q3 2016 on the appropriateness of current funding 78
Information Report to Housing & Homelessness Advisory Committee October 13, 2016 Page 4 of 5 Report Number HHC-16-011 provided per applicant under the Secondary Suites Affordable Housing Grant Program. Exhibit B Secondary Suite Program Uptake Summary, outlines the details of each of the eight funded or committed secondary suite projects. Of the eight applications, one has accessed the Municipal Fee Rebate Program, six have received funding under the Secondary Suite Affordable Housing Grant, and one project has accessed both programs. Six of the seven homeowners receiving the Secondary Suite Affordable Housing Grant have received the maximum funding level of $15,000. Information provided within the homeowners applications indicate the average development cost amongst the funded and committed projects is approximately $47,000. Accordingly, the maximum funding level of $15,000 would offset approximately 32% of the average secondary suite development cost developed with program assistance. Since the inception of the City s secondary suites program, a total of 75 building permits have been issued for secondary suites. Based on the grant program uptake of eight projects, 11% of secondary suites constructed legally through the City s municipal Planning and Building Permit approvals process have benefited from grant funding assistance. To further review the appropriateness of the City s funding levels and program requirements, Exhibit C Secondary Suite Grant Program Review, provides a summary of other jurisdictions secondary suites grant programs. Amongst the ten programs that were considered, the average maximum contribution amount is $19,250. The majority of programs also require rents to be established at an affordable level and require the homeowner to reside at the property receiving the funding. The general program requirement that tends to vary somewhat amongst the programs is the requirement to rent to an income qualified household. Four of the ten programs reviewed do not require tenants to meet specified income levels. Based on staff s experience delivering the secondary suites grant program, there are four main perspectives amongst interested homeowners that choose not to pursue funding under the program including: 1) homeowners accessing the Secondary Suites Affordable Housing Grant must have their primary residence at the property receiving funding; 2) prospective tenants must have incomes below specified income levels; 3) homeowners outside of the secondary suites as-of-right permission area perceived concerns about the complexity and uncertainty related to the zoning by-law amendment application process; and 4) the amount of funding available does not sufficiently offset the rental income loss. The concern related to the owner-occupancy requirement is that property owners who are interested in creating a secondary suite and renting it, in accordance with the program s affordability requirements, are unable to do so unless they are intending to live at the property. Interested homeowners concern regarding the income eligibility criteria relates to their perceived ability to properly screen and select tenants. The maximum income level for a one bedroom secondary suite is $33,000 under the program guidelines, which some homeowners feel will limit the pool of potential tenants that would be able to meet the income criteria. Staff have also noted that, once completing the calculations, some homeowners have determined the level of capital funding does not justify the monthly rental loss over the affordability period. 79
Information Report to Housing & Homelessness Advisory Committee October 13, 2016 Page 5 of 5 Report Number HHC-16-011 In order to ensure the secondary suites grant program has been communicated to homeowners across the City, advertising has included print and digital media, presentations to the public and local professional and housing industry organizations, brochures at key City locations including the City s development services hub at 1211 John Counter Boulevard, and direct communication with homeowners pursuing secondary suites Planning and Building Permit applications through the City s development pre-application process. Existing Policy/By-Law: 10 Year Municipal Housing & Homelessness Plan Capital Investment in Affordable Housing Program Policy Notice Provisions: Not applicable Accessibility Considerations: Not applicable Financial Considerations: Not applicable Contacts: Lanie Hurdle, Commissioner, Community Services 613-546-4291 extension 1231 Sheldon Laidman, Director, Housing & Social Services 613-546-2695 extension 4957 Other City of Kingston Staff Consulted: Lee Campbell, Manager, Housing & Child Care John Henderson, Housing Programs Administrator Exhibits Attached: Exhibit A Exhibit B Exhibit C Secondary Suite Affordable Housing Grant Program Guideline Secondary Suite Program Uptake Summary Secondary Suite Grant Program Review 80
City of Kingston Secondary Suite Affordable Housing Grant Program Guideline Page 1 of 8 The City of Kingston is offering the Secondary Suites Affordable Housing Grant Program to stimulate homeowner investment to create alternate housing options within the City. This program includes two different funding streams: 1. Secondary Suites Municipal Fee Rebate This stream provides a forgivable loan for projects within areas of the City where Planning applications are required to permit a secondary suite. Eligible expenses include required municipal application fees of up to a maximum $7,000. Forgiveness of the loan is dependent on providing the unit at an affordable rental rate to an income qualified household for a minimum one year affordability period. 2. Secondary Suites Affordable Housing Grant This stream provides a forgivable loan of the lesser of $15,000 or 75% of the costs associated with developing a secondary suite. Funding will be provided to owneroccupied households who create a secondary suite and commit to providing the unit at an affordable rental rate to an income qualified household for a minimum five year affordability period. A Second Suite, also known as a basement apartment, granny flat, or in-law suite is a self-contained accessory dwelling associated with a single-detached, semi-detached, or row house dwelling. Secondary Suites must meet applicable Zoning By-Law and Building Code regulations in order to provide healthy and safe living conditions while integrating appropriately within the neighbourhood. Before completing and submitting an application for the Secondary Suites Grant Program, be sure to review the Guide to Developing a Second Residential Unit within the City of Kingston and the Second Residential Unit Building Permit Guide to ensure your property can legally accommodate a secondary suite. Both guides are available at:www.cityofkingston.ca/housing June 2014 81
Page 2 of 8 1. Introduction To complement existing affordable housing programs available within the City of Kingston, the Secondary Suites Grant Program is now being offered to allow homeowners to participate in the creation of additional modestly priced rental housing within the City. Participants of the Secondary Suites Grant Program must commit to: 1) renting the suite at an affordable rate for an agreed upon period of time, and 2) rent the suite to a household that meets certain household income criteria. Provided these two requirements are met, there are no other conditions or requirements on who can rent the suite. This guide provides an overview of the Secondary Suites Grant Program including program eligibility criteria and affordability period requirements. Secondary Suites Grant Program Highlights Provides financial assistance in the form of a forgivable loan to homeowners who create a new secondary suite or renovate an existing secondary suite to meet appropriate Building and Fire Code requirements. A Funding Agreement will be executed between the homeowner and the City; the agreement will specify the requirements of the homeowner and other terms and conditions of the loan. All Funding Agreements providing greater than $5,000 will be secured through registration on title of the property behind any primary mortgage financing; projects receiving less than $5,000 will provide appropriate security in the form of a Promissory Note. Full forgiveness of the loan is dependent on maintaining compliance with the Funding Agreement for the duration of the affordability period; contravention of the funding agreement may result in the required repayment of the loan. Prior to receiving conditional acceptance into the program, the property must not have any outstanding property taxes or other outstanding fees or charges owed to the City of Kingston. Program funding is dependent on available municipal budget associated with the Affordable Housing Capital Investment Program. Eligible projects submitted during or following construction will only be considered if funding is available. 82
2. Program Streams Page 3 of 8 2.1 Secondary Suites Municipal Fee Rebate The Secondary Suites Municipal Fee Rebate stream is intended to reduce the costs associated with the creation of a secondary suite within areas of the City where municipal planning approvals are required. Eligible expenses include application fees collected by the City s Planning & Development Department at the time a required application is submitted by a homeowner. Typical applications required within the urban area of the City (i.e. generally areas south of Highway 401) include Zoning By-law Amendment or Minor Variance. Within areas north of Highway 401, a Holding Symbol Lift application will be required. The fees associated within these applications are as follows: Municipal Planning Application Fees Application Type Zoning By-law Amendment a. Minor Application (no addition to the building is proposed) Zoning By-law Amendment b. Basic Fee (generally required when an addition is proposed) Application Fee $3,486.95 $6,756.55 Holding Symbol Lift (required in rural area north of HWY 401) $1,961.75 Minor Variance (required when minor relief from zoning by-law $2,095.55 is required) Note: In addition to the application fees, additional costs may be incurred by the homeowner to acquire any studies or reporting required in support of the application. Fees associated with such studies and reporting are not eligible for reimbursement within this funding stream; however, these costs should be eligible expenses within the Secondary Suites Affordable Housing Grant program. The Secondary Suites Municipal Fee Rebate stream provides a maximum of $7,000 of funding to cover required application fees. A homeowner participating in this grant stream is required to rent the suite at an affordable rate to an income qualified household for a minimum one year affordability period. Upon occupancy of the unit, the homeowner will be required to provide proof of the rental rate and the tenant household s gross income as indicated on the previous year s Canada Revenue Agency Notice of Assessment (Line 150) before the funding will be provided. If the secondary suite becomes vacant during the one year affordability period, a new tenant must be selected that meets the income qualification 83
Page 4 of 8 and proof of income eligibility must be provided to the City. After the one year period, the homeowner has no further obligations with respect to the affordability agreement; however, rental rate increases would be subject to maximum rates as established annually by the Residential Tenancies Act as long as the occupant continues to reside in the suite. After the one year affordability period, and upon a new tenant taking occupancy of the secondary suite, the rental rate could be re-established at an agreed upon amount with the new tenant. Provided the homeowner meets the requirements of the one year affordability period, no repayment of the funding assistance would be required. 2.2 Secondary Suites Affordable Housing Grant The Secondary Suites Affordable Housing Grant stream provides a further level of financial assistance to homeowners who create a new secondary suite or upgrade and existing secondary suite to meet appropriate Building and Fire Code requirements. Within this funding stream a minimum five year affordability period is required. The maximum funding available is the lesser of $15,000 or 75% of the incurred costs; receipts will be required as proof of expenses. Homeowners accessing this funding program must have their primary residence located at the property that is receiving the funding. Upon occupancy of the unit, the homeowner will be required to provide proof of the rental rate and the tenant household s income as indicated on the tenant s previous year s Canada Revenue Agency Notice of Assessment (Line 150). On the anniversary of the initial occupancy, the homeowner will be required to submit proof of the monthly rental rate. After the initial occupancy, the homeowner would only need to prove tenant income eligibility if the occupancy changes during the five year affordability period. After the five year affordability period, the homeowner has no further obligations; however, rental rate increases would be subject to maximum rates as established annually by the Residential Tenancies Act as long as the occupant continues to reside in the suite. After the affordability period and upon a new tenant taking occupancy, the rental rate could be reestablished at an amount agreed upon with the new tenant. Provided the homeowner meets the requirements of the five year affordability period, no repayment of the funding assistance would be required. 3. Frequently Asked Questions What are the key terms and conditions of the grant? Participants in the Municipal Fee Rebate program must enter into a funding agreement establishing a one year affordability period. Participants in the Affordable Housing Grant program must enter into a funding agreement establishing a five year affordability period. 84
Page 5 of 8 The funded suite must be available for rent throughout the entire term of the Funding Agreement. The owner of the home must comply with the funding agreement for the entire affordability period in order for the loan to be fully forgiven at the end of the term. The funded property must be the primary residence of homeowners who participate in the Affordable Housing Grant program stream. How does the City determine the affordable rental rate? The maximum rent charged is 80% of the Canadian Mortgage and Housing Corporation s Average Market Rent for a comparable sized unit; the 2016 rates for the Kingston area are as follows: Bedroom Size 2014 Average Market Rent (Utilities Included) Bachelor Unit $679 $543 One Bedroom $921 $737 Two Bedroom $1,099 $879 80% Affordable Rent (Utilities Included) Note: Average Market Rents are revised annually on January 1; during occupancy regular annual rent increases are permitted in accordance with the Residential Tenancies Act. No additional fees for parking are permitted. What happens if I want to sell my home prior to the end of the affordability term? For both programs, if you sell or transfer ownership of your home during the term of the Funding Agreement, you can either transfer the agreement to the new owner or payout the balance of the loan. In the case of transferring to a new homeowner, the new owner will be responsible for fulfilling the terms and conditions of the agreement. For the Affordable Housing Grant, if the Funding Agreement is not transferred to the new homeowner, you will be required to repay the outstanding prorated balance of the loan (i.e. prorated based on 20% per year of compliance with the funding agreement). 85
Page 6 of 8 Am I eligible to receive funding through the program? Your property must be within the City of Kingston and meet the requirements of the Ontario Building Code and applicable zoning by-law requirements. If you have property taxes in arrears or other outstanding charges owed to the City, conditional acceptance into the program will not be issued until the arrears are cleared. What are the income eligibility crieteria for tenants of the secondary suite? Upon the initial tenancy being established, or when a new tenancy occurs at any point during the affordability period, the tenant s gross household income must be below the following maximum household income limits: Bedroom Count Bachelor Unit $26,000 One Bedroom $33,000 Two Bedroom $40,000 Maximum Income Limit Note: Gross household income is the total of the incomes of all working members of the household as established by the before tax income as stated on the previous year s Canadian Revenue Agency Notice of Assessment (Line 150). Upon a new tenancy occurring during the one or five year affordability period, confirmation of the tenant s income is required to be provided to the City. 86
Page 7 of 8 4. The programs at a glance Program Features Funding Program Objective Amount of Funding Available Length of Affordability Period Tenant Selection Repayment Requirements Secondary Suites Municipal Fee Rebate Provides a fee rebate to homeowners in areas of the City where Municipal Planning application fees are required to permit a secondary suite Up to $7,000 is provided to cover costs associated with applications for zoning by-law amendment, minor variance, or holding symbol lift The homeowner must rent the secondary suite at an affordable rental rate for a minimum one year period. Any tenant household can occupy the secondary suite provided the income elgibiltiy criteria outlined within this guide are met at the time that the tenancy commences Repayment of the loan is not required provided the secondary suite is rented to an income qualified household throughout the one year affordability period Secondary Suites Affordable Housing Grant Provides funding assistance to offset the costs associated with the development of a secondary suite The lesser of $15,000 or 75% of eligible construction costs; receipts are required to claim expenses. The homeowner must rent the secondary suite at an affordable rental rate for a minimum five year period Any tenant household can occupy the secondary suite provided the income eligibility criteria outlined within this guide are met at the time that the tenancy commences Repayment of the loan is not required provided the secondary suite is rented to an income qualified household throughout the minimum five year period. If a homeowner should be required to cancel the agreement or no longer qualifies, repayment of the loan will be prorated. 87
Page 8 of 8 5. How the Application and Funding Process Work Homeowner Responsibilities 1. Homeowner submits funding application to the Housing & Social Services Department 2. The Housing & Social Services Department reviews application eligibility and issues letter of Conditional Funding Offer to qualified projects 3. Following issuance of the Conditional Funding Offer, the homeowner has one year to acquire a Building Permit and complete the required work 4. Final inspections occur and Occupancy Permit is issued 5. Homeowner provides proof of Occupancy Permit 6. Funding Agreement and promissory note (if required) are signed 7. Homeowner provides proof of lease, affordable rent, and tenant income confirmation; affordability term commences 8. Funding agreement is registered on title if required; funding is provided to homeowner 9. Loan is forgiven in full for Municipal Fee Rebate Program participants 10. Homeowner provides proof of affordable rent annually; if a new occupant takes tenancy, income qualification is required 11. End of year five; Affordable Housign Secondary Suite Grant loans are forgiven in full Before submitting an application you should Review the information materials provided on the Housing Department s Secondary Suites information webpage: www.cityofkingston.ca/secondarysuites Complete the Zoning Checklist and review with the Planning Building & Licensing Department to determine if your property meets the Zoning By-law requirements. For assistance completing or to review the Zoning Checklist with a Planner contact: Planning, Building & Licensing Department, 1211 John Counter Boulevard, (613) 546-4291 extension 3180 or planning@cityofkingston.ca Determine how the construction of your secondary suite will be funded and whether the City s grant assistance and affordability period requirements fit your objectives. If you have additional questions about the funding program or to submit an application contact:the Housing & Social Services Department, (613) 546-2695 extension 4871 or housing@cityofkingston.ca 88
Exhibit B Secondary Suite Program Uptake Summary Secondary Suite Project Municipal Fee Rebate Program Affordable Housing Grant Total Funding Provided/Committed 1 (complete) No Yes $15,000 2 (complete) Yes No $3,286 3 (complete) No Yes $1,483 4 (complete) No Yes $15,000 5 (complete) No Yes $15,000 6 (under development) No Yes $15,000 7 (under development) No Yes $15,000 8 (under development) Yes Yes $18,286 89
Exhibit C Secondary Suite Grant Program Review Program Host Maximum Funding Affordability Term Owner Occupancy Requirement Income Restriction Rent Level Restriction City of Kingston $15,000 5 years Yes Yes Yes City of Calgary, AB $25,000 5 years Yes No Yes City of Camrose, AB $25,000 5 years Yes No Yes City of Victoria, BC $5,000 No Yes No No City of Edmonton, AB $20,000 5 years Yes Yes Yes Province of Manitoba $35,000 10 years Yes Yes Yes County of Simcoe, ON $15,000 5 years Yes Yes Yes Prince Ed. / L&A County $20,000 15 years Not applicable Yes Yes County of Bruce, ON $25,000 10 years Yes Yes Yes District of Kitimat, BC $7,500 5 years No No Yes 90