Offering Internal Subsidy at EOA
Are you a federal housing provider that wants to offer subsidy at the end of your operating agreement (EOA)?
If, so there are some things to consider.
Operating agreement funding is expiring and it is not clear if various levels of government will make up for the loss of subsidies. At the same time, housing providers have social missions to offer affordable housing in their communities.
There are several legal considerations that must be addressed before EOA. If you are currently offering subsidized rent (through rent-geared-to-income) and/or you want to continue doing so, there are some things to consider. Providers who fail to plan may face significant financial impact –the more subsidized units you have, the greater the financial risks.
Internal subsidy occurs when private funds are used from the housing provider’s general operating budget to subsidize low-income tenants’ rents
In order to plan for EOA and offering subsidy, you need to gather and review some important information:
- Operating agreements –if you cannot find it contact your Service Manager
- Any funding agreements you have (example: Social Housing Renovation and Retrofit Program or SHRRP)
- Your lease
- Residential Tenancies Act section 7(1)
- Housing Services Act, 2011 ONTARIO REGULATION 368/11 DESIGNATED HOUSING PROJECTS — SECTION 68 OF THE ACT
- Your financial statements & projections
- Confirm whether the potentially subsidized units are exempt from rent increase rules. Units may continue to be exempt if the project continues to operate an “agreement” with a municipal body or Service Manager as set out in section 7(1)3(iii) of the RTA
If this is the case, the housing provider should be able to continue to adopt and make changes to an internal subsidy program without concerns about being offside the RTA’s rent increase rules.
- If the housing provider is not exempt from rent increase rules it may be possible to continue to offer internal subsidy with a carefully designed program. In order to do this the provider should:
- Determine lawful rent –this is the rent the tenant would pay if not receiving subsidy
- Identify lawful rent in the lease at the beginning of a tenancy
- Provide a breakdown of rent showing the lawful rent, the internal subsidy amount and the subsidized rent payable before EOA
- Prepare a policy which clarifies that the subsidy is not a discount and have tenants sign back an acknowledgement of the policy.
- Consider limiting the amount of the internal subsidy to the amounts allowed as a discount under the RTA
It is important to note that there have been very few cases decided on the issues outlined in this guide and new decisions could affect this information. ONPHA members can access more in depth information here.
This information does not constitute legal advice. Contacting a lawyer about your proposed subsidy program can help prevent costly mistakes.