From Subsidies to Sustainable Communities:

From Subsidies to Sustainable Communities: The Impact of Habitat Homeownership on the City of Toronto October 2011

From Subsidies to Sustainable Communities: The Impact of Habitat Homeownership on the City of Toronto Message from the CEO... p. 2 Executive Summary... p. 3 Habitat for Humanity: An Introduction... p. 5 Habitat for Humanity International... p. 5 Habitat for Humanity Toronto... p. 5 A Hand Up Not a Hand Out... p. 5 The Affordable Housing Crisis: Understanding the Problem... p. 6 Toronto: Canada s Poverty Capital... p. 6 Snapshot of a Crisis... p. 6 Cycle of Poverty is Perpetuated... p. 6 The Need for Affordable Housing is Great... p. 7 Habitat Homeownership: Catalyst of Change... p. 9 From Subsidies to Sustainable Communities... p. 10 Building Multigenerational Wealth... Qualifiying for a Habitat Home... p. 11 p. 13 The Future: Building Communities... p. 14 References... p. 16 Data compilation conducted by TinyBriefcase, a Toronto based consultancy organization. For more information, visit www.tinybriefcase.com. From Subsidies to Sustainable Communities 1

Message From The CEO The affordable housing crisis is at an all-time high for low-income earners in the City of Toronto. According to the Poverty, Housing and Homelessness report by the City of Toronto, one in five households lives in housing that is too small, needs repair, or is unaffordable. There are more than 600,000 low-income families living in Toronto and more than 76,000 households remain on a wait list for one of the 93,000 social housing spots. That s a 7% increase from 2009 and 15.1% increase from 2007. The strain of affordable housing is multi-faceted; from the financial impact on City budgets to negative social influences on health, family dynamics and child development it touches more than just the immediate family. In 2009, the City of Toronto spent more than $270 million to support 164,000 people living in social housing. 1 Despite talks of budget cuts in 2011, with poverty increasing year over year, reduced funding is not the answer. The time for action is now. Affordable housing is the solution to help alleviate those bound by and living in poverty. The Habitat model ensures that low-income families own their home and no longer rely on housing subsidies. Prior to partnership with Habitat for Humanity Toronto, a typical household would receive $10,508 in subsidies annually from taxpayers for social housing. By owning their home, each Habitat homeowner contributes over $2,000 in property taxes each year, turning a substantial taxpayer burden into a positive community impact. Habitat for Humanity s affordable housing model transforms government subsidies into household equity. Moving families out of living in poverty to becoming active tax-paying members of the community is a step forward. Building equity not only creates a valuable asset for this generation, but breaks the cycle of poverty for generations to follow. But more needs to be done. You can be part of the solution. Donate, build, volunteer, fundraise and shop at a Habitat Toronto ReStore help us work with families in need of simple, decent, and affordable housing. Imagine the impact the Habitat model could have if we all partnered together to build a better city. Neil Hetherington, CEO Habitat for Humanity Toronto From Subsidies to Sustainable Communities 2

Executive Summary The financial impact analysis conducted by a third-party consultant Tiny Briefcase, examined Habitat for Humanity Toronto homeowner reported income data and information from the Canadian Housing and Mortgage Corporation (CHMC), the City of Toronto, the Toronto Housing Commission, the Affordable Housing Office, and the Toronto Real Estate Board, to assess the economic benefits achieved for families and the impact the model has had on the City of Toronto. Affordable housing crisis in Toronto is at an all-time high. One in five households lives in housing that is too small, needs repair, or is unaffordable. 2 The outlook of a decade or longer waiting period for the opportunity to rent one of the limited number of subsidized units in a disadvantaged neighbourhood, coupled with the threat of budget cuts, is disheartening for the more than 600,000 low-income people living in Toronto. 3 Data shows homeownership through the Habitat for Humanity Toronto model transforms government subsidies into household equity. This helps families break the multigenerational cycle of poverty, providing a hand up, not a hand out. In addition, the model allows potential redeployment of City funding to other programs and/or affordable housing solutions. In 2010 alone, Habitat Toronto homeowners contributed almost $395,000 in property taxes to the City of Toronto. 4 In 2011, that number is expected to increase by 13% to $454,260. 5 As a taxpayer, they further support the funding of other programs and services. Habitat for Humanity Toronto is committed to helping these hardworking families living in need. The homeownership program is for families looking to improve their lives through commitment and partnership, and in turn, to become active contributors to their neighbourhoods and to the City. From Subsidies to Sustainable Communities 3

Habitat for Humanity International (HFHI) Habitat for Humanity International is a nonprofit organization whose mission is to mobilize volunteers and community partners in building affordable housing and promoting homeownership as a means to breaking the cycle of poverty. Over the past 35 years, HFHI has built more than 500,000 houses that benefited over 1.5 million people in 3,000 communities around the world. Habitat for Humanity Toronto Established in 1988 in response to the affordable housing crisis in the City of Toronto, Habitat for Humanity Toronto (Habitat Toronto) has built more than 200 homes for lowincome families across the city. Habitat Toronto has set the goal to build at least 50 simple, decent and affordable homes every year through 2015. A hand up, not a hand out Habitat For Humanity: An Introduction By building decent, affordable homes, Habitat for Humanity Toronto helps lowincome families break the cycle of multigenerational poverty. Homeownership allows families to build equity and capital so they no longer need to put their income towards overcrowded and substandard housing. Habitat for Humanity Toronto empowers families by partnering with them to become homeowners through a no-interest, no-profit mortgage. This hand up gives hard working families access to capital and helps them break free from the cycle of poverty. Everyone who gets sleepy at night should have a simple, decent place to lay their heads, on terms they can afford to pay Millard Fuller Founder, Habitat for Humanity International From Subsidies to Sustainable Communities 5

The Affordable Housing Crisis: Understanding The Problem Toronto: Canada s Poverty Capital Canada s affordable housing crisis is felt locally in Toronto with almost half of tenant households paying 60% or more of their income on shelter. 6 Many are forced to stay in substandard rental condition in disadvantaged communities as they cannot afford to live in a desirable neighbourhood. Snapshot of a Crisis: 7 1 in 5 70% households lives in over-crowded, substandard or unaffordable housing. of those living in substandard housing are renters. 600,000 low-income families live in the City of Toronto. 76,000 households remain on a waiting list for social housing. 60% of an average low-income family s income goes directly to food, shelter or other necessities. Cycle of Poverty is Perpetuated The impact of poverty on children goes beyond material deprivation and contributes to social exclusion. Many children from low-income families experience reduced motivation to learn, delayed cognitive development, lower achievement, less participation in extracurricular activities, lower career aspirations, interrupted school attendance, higher drop-out rates, and lower university attendance. According to The Urban Poverty Project, published by Canadian Teachers Federation, there are important links between early childhood development and what goes on in a child s home environment. It is essential to provide children with a stable, supportive, and safe environment in which to live for them to succeed later in life. 8 From Subsidies to Sustainable Communities 6

The Need For Affordable Housing is Great According to statistics from the City of Toronto s Poverty, Housing and Homelessness in Toronto, the annual income of a low-income family with two adults and two children is less than $38,610, yet, the annual income needed to afford a one-bedroom apartment is $38,000. 9 The number of families living in poverty in high-rise towers has grown from 25% in 1981 to 39% in 2006. 10 This, coupled with a housing market experiencing an average house price rise at a compound rate of 6% per year in the GTA over the past 25 years, makes homeownership an impossible dream for most of low-income families. 11 When a family spends upwards of 60% of their income on housing, little remains for other basic necessities. This has significant downstream impacts on the community, city, and even family members. Over the last 25 years, the real cost of renting an apartment for a family of four has risen 43% in the Greater Toronto Area, while real wages have fallen 6.1%, making it harder and harder for low-income families to live and work in the city. 12 As families move further from the core, their commute times lengthen, and overall quality of life declines substantially. The harsh reality: Neighbours or loved ones are forced to decide between paying the rent and other necessities. $58,000 Rent Rising, Income Falling (figures in real 2006 dollars) $1,400 $56,000 $54,000 $52,000 $1,200 $1,000 $50,000 1981 2006 $800 Median Income Average Rent In 2009, the City of Toronto contributed $270 million to support over 164,000 people living in Toronto Community Housing. 13 The magnitude of this number reflects the difficulty families face in securing affordable housing within the city. Year over year, the demand for affordable housing in the City of Toronto continues to grow. In 2010, more than 76,000 families remain on a wait list 14 - that s a 7% increase from 2009 and a 15.1% increase from 2007. 15 The City ought to look for permanent solutions to this challenge. Habitat for Humanity Toronto is part of the answer. From Subsidies to Sustainable Communities 7

The Habitat for Humanity model provides affordable housing opportunities to families no other non-profit or private mortgage lender in Toronto is able to serve.

Habitat Homeownership: Catalyst Of Change Since 1988, Habitat Toronto has played an important role in addressing the issue of affordable housing in the Greater Toronto Area. In 2010, over 1,500 families attended one of many Habitat for Humanity Toronto Homeownership information sessions. To date, Habitat Toronto has helped more than 200 families achieve the dream of owning their own home, a dream that remains far out of reach for many living in one of the continent s most expensive real estate markets. Communities benefit as former renters become homeowners who contribute to the tax base. As the poverty cycle is broken and a family s financial situation improves, their dependence on local social services is decreased. On average, a Habitat Toronto homeowner s income rises by 8% each year 12% 10% 8% 6% 4% 2% 0% Average Habitat Toronto Homeowner Income Growth 2006 2007 2008 2009 More than anything, homeownership provides stability for families. Relieved from the overcrowded, and often unsafe, conditions systemic in low-income housing, Habitat Toronto homeowners start to realize benefits inside and outside the home. Despite the recession in 2008-2009, on average, a homeowner s income rises by 8% each year they are in their home. 16 Coupled with the accumulation of a stable asset in the home itself, the financial position of the homeowner improves substantially. No longer overcrowded in small apartments, the children of the homeowners also benefit. 62% of Habitat homeowners report an immediate improvement in school grades, while older children gain the stability in their home life that enables the pursuit of higher education. 17 From Subsidies to Sustainable Communities 9

From Subsidies To Sustainable Communities Homeownership through the Habitat Toronto program transforms government subsidies into household equity. Since 2000, municipalities have been responsible to fund the costs of social housing through property taxes. This means that every year, the City of Toronto must find room in an already overcrowded budget to continue to provide these subsidies. The Habitat Toronto program ensures that low-incomes families own their own home, which, in turn, has a twofold effect. First, they no longer rely on the annual subsidy required to support affordable rental programs such as Toronto Community Housing. Second, but more importantly, they move from the position of receiving assistance to one of contributing to the City s annual operating budget through the payment of property taxes. In 2010, Habitat Toronto homeowners contributed over $395,000 in property taxes and will contribute an approximate $454,000 in 2011 to the City of Toronto, helping to fund the services and programs vital to Toronto communities. 18 Housing Costs to Taxpayers Shelter Bed: ($1,932)/month Permanent Housing: ($199)/month Habitat Toronto Home: $168/month Shelter beds and social housing play an important role in our city. They are necessary, but they do cost taxpayers money. Compared against the monthly cost of $1,932 for a shelter bed in Toronto or an average $199 per month subsidy for social housing unit, Habitat Toronto homeowners now give back on average $168 per month to the city. 19 By owning their own home, each Habitat Toronto homeowner contributes over $2,000 in property taxes each year, turning a substantial taxpayer burden into a positive community impact. From Subsidies to Sustainable Communities 10

Building Multigenerational Wealth For most families, their home represents their most substantial asset. It also has been a relatively stable and consistent means by which to increase family wealth, as housing prices in Toronto have risen at a compound rate of 6% per year over the past 25 years. 20 As family homes are sold, the wealth accumulated often flows downwards to the next generation, enabling further accumulation of assets. From Rent Expenses to Building Equity Annual Wealth Created by Habitat Homeownership In 2010, Habitat $30,000 Toronto homeowners captured $26,840 in $25,000 $20,000 Average Houshold Income Increase: $1,561 Average Equity Contribution: $6,960 value in their home through principal $15,000 $10,000 Average Home Appreciation: $18,319 repayments and $5,000 market appreciation. $- $(5,000) Prior to Ownership: $9,576 in rent $(10,000) Prior to owning their home, Habitat Toronto homeowners who lived in subsidized housing would receive an average of $10,508 in subsidies from taxpayers and spend an average of $9,576 each year in rent. 21 For families not living in social housing, upwards of 60% of their income went to rent. With an average market value of a Habitat Toronto home at $300,000 and an average monthly mortgage of $585 per month, Habitat Toronto homeowners are able to build equity. In 2010, Habitat homeowners captured $26,840 in value in their home through principal repayments and market appreciation. 22 That accumulation of equity not only builds a valuable asset for this generation, but for the generations to follow. From Subsidies to Sustainable Communities 11

62% of Habitat homeowners report an immediate improvement in school grades, while older children gain the stability in their home life that enables the pursuit of higher education.

Qualifying For A Habitat Home Habitat for Humanity Toronto is a homeownership program for families looking to improve their lives through commitment and partnership. Potential Partner Families must be living in need and meet income requirements relating to their family size. As part of their contribution, Partner Families must complete 500 hours of sweat equity volunteer hours towards the construction of their home and/or other homes. In addition, Partner Families must attend training sessions in personal finance, mortgages, insurance, and legal matters. Habitat Toronto homes are sold to Partner Families at no profit and financed with affordable mortgages. Habitat for Humanity Toronto builds simple, decent and affordable homes that are on average 1,200 square feet and cost $75 per square foot to build. 6 the 1 them We reinvest all donations and mortgage payments back into home ownership program. We identify eligible homeowners and prepare for home ownership. We help them build their homes with donated funds, materials and volunteer 2 labour. 5 Their interest-free mortgage is amortized to ensure payments are always less than 30% of their income. 3 fundraising 100% of donations go to home building; ReStore profits pay for all administration and costs. 4 Their home is purchased with a down payment of 500 hours of sweat equity. From Subsidies to Sustainable Communities 13

The Future: Building Comunities From building just 6 homes in the first 12 years, Habitat for Humanity Toronto is now working to complete 45 homes in 2011. Last year, Habitat Toronto received a few hundred applications from households wishing to become Partner Families. Thirty-five families are now awaiting the completion of their new home, with another 49 in the process of contributing 24,500 hours towards new Habitat Toronto initiatives. Mortgage payments from current Habitat Toronto homeowners go directly into a fund to build more Habitat Toronto homes, known as the Fund for Humanity. As part of the Fund for Humanity, the mortgage income from every 12 homes can fund one additional home per year. It is just one more way Habitat Toronto homeowners give back to the community, by helping build more homes, making Toronto a more diverse and inclusive city. Habitat for Humanity Toronto provides affordable housing opportunities to families that no other nonprofit or private mortgage lender is able to serve. Habitat Toronto gives hard working families access to capital that helps them take the first step towards breaking the cycle of poverty. Giving a hand up, not a hand out. 60 Partner Family Homes Completed 250 # Homes Completed (by year) 50 40 30 20 10 200 150 100 50 0 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Cumulative # of Homes From Subsidies to Sustainable Communities 14

References 1. Toronto Community Housing 2009 Annual Review, pg. 5. 2. City of Toronto, www.toronto.ca, 2010. 3. Poverty, Housing, and Homelessness in Toronto, www.toronto.ca, January 2011. 4. Habitat for Humanity Toronto data 2010 and 2011. 5. Ibid. 6. Daily Bread Foodbank, Fighting Hunger, Who s Hungry, 2010 Profile of Hunger in the GTA. 7. Poverty, Housing, and Homelessness in Toronto. 8. Canadian Council of Social Development The Urban Poverty Project 2007, and Toronto Housing 2011 Housing Connections, and Homeless Action Groups, and Vital Signs 2008, published by Toronto Community Foundations. 9. Poverty, Housing, and Homelessness in Toronto. 10. Vertical Poverty, United Way, January 2011. 11. Toronto Real Estate Board, www.torontorealestateboard.com, 2011. 12. Real cost of rent based on average rent of a 3-bedroom unit in Toronto, see Rental Market Statistics, Canadian Mortgage and Housing Corporation. For real wages, see Statistics Canada, Census 1981 and 2006. 13. Toronto Community Housing 2009 Annual Review. 14. Poverty, Housing, and Homelessness in Toronto. 15. Poverty, Housing and Homelessness in Toronto, 2011, 2010, 2009. 16. Habitat for Humanity Toronto homeowner data, 2010. 17. Ibid. 18. Habitat for Humanity Toronto data, 2010, 2011. 19. For shelter bed and social housing costs, see Wellesley Institute, The Blueprint to End Homelessness in Toronto. For Habitat Toronto Homeowner contribution, see Habitat for Humanity Toronto data, 2011. 20. Toronto Real Estate Board. 21. For subsidies, see Wellesley Institute, The Blueprint to End Homelessness in Toronto. For average rent, see Habitat for Humanity Toronto data, 2010 22. Habitat for Humanity Toronto data and Toronto Real Estate Board market value data, 2011. From Subsidies to Sustainable Communities 16

Toronto We have doors that open doors When you donate or buy renovation materials at the ReStore, you re helping Habitat for Humanity Toronto open a new door for a deserving Toronto family. ReStore East York 155 Bermondsey Rd Toronto, ON. M4A 1X9 416-755-7353 ext 248 ReStore Etobicoke 7 Queen Elizabeth Blvd Toronto, ON. M8Z 1L9 416-755-7353 ext 302 ReStore North York 1120 Caledonia Rd Toronto, ON. M6A 2W5 416-755-7353 ext 301 ReStore Studio District 3 Carlaw Ave Toronto, ON. M4M 2R6 416-755-7353 ext 303 This publication was paid for by the Habitat for Humanity Toronto ReStore

To learn more about how Habitat for Humanity Toronto is helping working families break the cycle of poverty, and to volunteer or donate, visit www.torontohabitat.ca