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Posted by on Jun 2014 in All Stories, Features, News Updates | 0 comments

Tough decisions: End of operating agreements for Aboriginal providers

Federally-funded non-profit housing providers will begin to see their operating agreements expire in the coming years. These subsidy agreements, valued at more than $4 billion between 2014 and 2032 in Ontario, were fixed to the term of a property’s mortgage.

Buildings with federal subsidies are some of the oldest in the province and many require expensive renovations or refurbishment to continue to meet the needs of tenants. Without renewed funding, providers will have difficulty fulfilling their mandate with reduced operating budgets.

Aboriginal housing providers, which represent a large share of Ontario’s federally-funded agencies, will be among the most impacted by the end of operating agreements, especially considering that many of these providers have a high proportion of rent geared-to-income (RGI) units, which rely more heavily on subsidies.

“The end of operating agreement scenario is especially tough for urban Aboriginal providers because their community has been disproportionately challenged because of severe poverty issues,” says Sharad Kerur, Executive Director of ONPHA. “Providers have met that challenge with a high ratio of RGI units, but this will be unsustainable from a financial standpoint after operating agreements expire and subsidies aren’t available.”

“I fully understand and appreciate the urban Aboriginal provider in terms of helping their community and maintaining their culture, but given
today’s economic and regulatory climate, these providers will need to assess how they can continue to maintain their services without abandoning their cultural mandate,” says Kerur.

“Some tough decisions need to be made,” says Marc Maracle, Executive Director of Gignul Non-Profit Housing in Ottawa.

Maracle adds that buildings serving urban Aboriginal populations also experience a higher-than-average level of usage and, in some circumstances, overcrowding, which creates strain on building systems such as plumbing, heating, and water usage.

In addition, the majority of Aboriginal housing providers are in smaller cities and northern areas, where the value of a property won’t have increased over a mortgage term as much as it may have in a larger urban centre, he adds. This limits a provider’s ability to leverage the equity in their buildings – an asset base that could be utilized after an operating agreement expires – to conduct maintenance, make repairs, and subsidize tenancies.

A decrease in funding and an increase in maintenance costs might force some providers to reduce the number of RGI units under administration and to raise them to market rents – a strategy that runs counter to the mandate of Aboriginal housing providers.

“Unfortunately, the people with the greatest need have the least ability to pay,” says Maracle. “The demographics for urban Aboriginal people haven’t changed over the years [and]…half of the Aboriginal population is under the age of 25.”

According to the Centre for Social Justice, Aboriginal people living in urban areas are more than twice as likely as non-Aboriginal people to be living in poverty. Aboriginal people also experience disproportionately higher rates of homelessness, substance abuse, suicide, and imprisonment.

“We have units for less than half the demand,” explains Maracle. “If we don’t have the funding to maintain lower-rent units, there will be fewer options for urban Aboriginal people. The fear is that this will lead to a rise in homelessness.”

“The demand is going up,” agrees John Abramowich, Property Manager at the Native People of Thunder Bay Development Corporation. “No new units are being built and we’re at risk of losing RGI units in the system. It’s a double whammo.”

To address the challenges associated with the end of federal operating agreements, all housing providers need to work together to share planning strategies and to raise awareness about the issue through political advocacy and public outreach.

“Governments and taxpayers have collectively made an investment in social housing in this province and that will be compromised with the end of operating agreements,” says Maracle. “The return on that investment is seen when young people graduate and participate in the economy and in their communities.”

Research has shown that access to an affordable home leads to better outcomes for families and communities. People living in homes they can afford are more likely to graduate from high school and participate in the workforce and less likely to spend time in hospitals, shelters, and prisons.

“We didn’t find ourselves in this situation alone or overnight,” says Maracle. “We have to build and leverage our relationships. Solutions come from all parties.”

ONPHA will host an information and discussion session on end of operating agreements for federal providers at the Annual Conference and Trade Show in November. Members interested in options and strategies for continuing to provide housing past the end of a federal operating agreement are encouraged to attend and learn from sector experts.

Four steps to start planning for the end of a federal operating agreement

ONE: Financial analysis. Determine your organization’s financial viability going forward in a post-operating agreement situation. ONPHA has an EOA financial assessment tool that can help you with this and our Member Services team is here to help with advice or customized training. You may need to undertake a market assessment of your building and explore new revenue tools like social enterprise, fundraising, and advertising.

TWO: Strategic planning. Draft a plan that includes capital needs for the future, the direction your organization will take, and the funding model you will use, post-operating agreement.

THREE: Talk to others. Consult with other organizations of a similar size and mandate – what are they doing?

FOUR: Advocate. Work with ONPHA and the Canadian Housing and Renewal Association to advocate for public investment in affordable housing.

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