Offering subsidy past end of operating agreements
For federal housing providers’ with Operating Agreements coming to an end (Section 95 and 26/27 operating agreements) there are specific considerations in offering internal subsidies. An internal subsidy occurs when a housing provider draws from their operating revenues to provide a subsidy and does not rely on external funding. The challenge at EOA is that the provider may not be exempt from parts of the Residential Tenancies Act which they previously relied on in offering subsidies.
There are two ways that subsidy can be offered post EOA while minimizing the risk of being held accountable to a subsidized rental amount in the event the tenant’s rent goes up.
- In the first case the housing provider meets the following two conditions under legislation:
- The unit is located in a project that was developed under an affordable housing program with the federal, provincial or municipal government
- has an “agreement” with a municipal body or Service Manager as set out in section 7(1)3(iii) of the RTA
In this case they no longer have their original operating agreement but have another agreement that satisfies legislation
- In the second case providers that carefully distinguish between lawful rents and subsidized rents while keeping their tenants informed in writing of the breakdown of rents payable can continue to offer subsidy. Increases to the lawful rent are subject to rent increase guidelines under the RTA but there is case law that suggests those restrictions are not applicable to subsidized rent.
Federal providers who are planning for the end of their operating agreements and are intending to continue to offer subsidy in keeping with their social purpose will need to:
- Determine if they are in receipt of an agreement in keeping with 1 b) above
- Determine if they are eligible for an agreement in 1 b) above if one is not in place
- Develop a clear idea of lawful rent, subsidized rent and the related tools to communicate to tenants
These steps will require conversations with the service manager or other levels of government. Support of a lawyer to minimize risk is also recommended. For more information keep an eye out in future e-alerts for an upcoming infoON on this topic.