Vaughn Palmer: NDP’s rental property purchase fund hits a snag

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VICTORIA — Four months after Premier David Eby created a $500 million fund to buy up rental properties on a one-time basis, his government is having to commit millions more in annual operating subsidies to the project.

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Eby announced the rental protection fund in mid-January in his rush to spend as much of the multi-billion-dollar budget surplus as possible before the March 31 end of the financial year.

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The money would be transferred to a stand-alone society, under the control of a trio of non-profit housing agencies, thereby ensuring it would be counted as spent before the year’s end.

The agencies were expected to use the funding to assist non-profit housing societies in purchasing for-sale rental properties, thereby keeping those units out of the hands of “predatory investors,” said Eby.

The money was intended to assist in one-time purchases only.

“The building needs to be self-sustaining without ongoing funding,” the premier emphasized.

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Industry sources expressed doubts about the premier’s proposed model for rental protection.

They said the most likely buildings to appear on the market would be older, perhaps ticketed for disposal or demolition, and probably in need of significant upkeep.

The higher-than-average cost of repairs and maintenance would be at odds with the premier’s insistence that buildings would need to be financed and managed in a way that was “permanently affordable” for the renter occupants.

The New Democrats claimed to have thought of that prospect and addressed it.

“Non-profit organizations will be supported in obtaining private financing so that income generated by current rents will sustain the financing and operating costs of the property, minimizing the financial involvement of the province,” said the news release.

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But several non-profits pointed out that it is much harder to line up sustainable operating funds than one-time capital grants.

Apparently, that message got through.

During the recent legislative session, Housing Minister Ravi Kahlon conceded that the projects would not be “self-sustaining on an ongoing basis” as the premier predicted.

Rather, the province would be providing an annual subsidy for minor repairs and maintenance amounting to “$1 million per year for every 400 units that are acquired,” Kahlon told BC United housing critic Karin Kirkpatrick.

The $500-million capital fund is expected to assist in the purchase of 2,000 to 3,000 units, depending on leverage and other financial arrangements.

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On that expectation, the province would be on the hook for $5 million to $8 million in subsidies every year, well in excess of the premier’s original vision.

The project has also fallen behind the schedule that Eby imagined back in January.

“The purchase of rental buildings could start as soon as within the next 60 to 90 days,” the premier told reporters Jan. 12.

Today the more realistic deadline is to start acquisitions before the end of this year.

The overseer society for the rental housing fund was still looking for senior executives when Eby was asked about its mandate and operating procedures in the recent legislature.

“When the society has hired their new CEO and VP, they’ll obviously be in a better position to be able to share those details,” said Kahlon. “It’s important to remind this house that the funds came from year-end, so they’ve left the government. All the information around the terms of reference, all those pieces, are up to the society now for release.”

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Based on what he’d been told to that point, Eby laid out the process for project approval.

“The intake process, from my understanding, will be a not-for-profit led. So not-for-profits will identify an opportunity. They will go to the society and say, ‘We have an opportunity,’” and then they go through the stages of approval.”

The first stage is to approve the not-for-profit: “They are in good standing, track record of successfully managing housing properties, evidence that a portfolio follows (standards), and capacity to absorb proposed acquisitions.”

The second stage is to vet the building: ”Available for purchase, at-risk of development, redevelopment and/or significant rent increases; not currently owned by government, co-op, not-for-profit or under a government affordability agreement; and vendors asking price, current rents and number and type of units.”

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The third stage is underwriting: “Appraisals, letters of intent from lenders, pro forma and 20-year cash flow demonstrating sustainability, costs, etc.”

All of which sounds onerous, as it ought to be, given public funds.

But the process doesn’t lend itself to the 60- to 90-day fast tracking of the premiere envisioned back in January.

This at a time when BC has just been named “the rental eviction capital of Canada,” by the housing research collaborative at the University of BC

BC leads the country in evictions, with almost double the rate of Ontario, and triple the rate of Alberta.

It also has the worst stats for “no fault” evictions, defined as cases where the tenant was kicked out so the landlord could occupy the place, sell it, convert it, or demolish it.

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Not a good time for the province to be counseling patience for renters facing evictions for one reason or another.

But not the first time that one of Eby’s ambitious plans is running behind schedule.

vpalmer@postmedia.com

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