East-end co-op faces tough financial choice
Spruce Court refinancing, repairs could come at cost to community
Spruce Court Co-op has provided affordable housing in downtown Toronto for more than 100 years and given the choice most of the current tenants would like to stay.
“We feel safe here. We love it here. We take a certain amount of pride” said Marisa Edwards, 41, president of the board of directors. “We know we are lucky to be in the downtown. It is not for everyone to live in a 100-year-old building, but we love it.”
The collection of buildings that make up the eastend housing co-op, while weathered and chipped, are the base of a solid community comprised of mixedincome residents, some of whom rely on government supplements administered by the Canada Mortgage and Housing Corporation to pay their rent.
But those supplements, Edwards fears, could be lost sooner than expected if the co-op moves forward with an opportunity to refinance its mortgage to raise cash for badly needed repairs.
The rent supplements at Spruce Court are available for about half of the 77 units, which range from bachelor apartments to townhouses. They are, Edwards explains, provided only to residents who, for one reason or another, cannot afford to pay market rent.
That rental help coincides with a fixed-interest mortgage, or operating agreement with the CMHC, part of a federal incentive to encourage co-op development. Their mortgage is not up for renewal until 2025, meaning the supplement was scheduled to remain in place until then.
The rent supplements were never expected to last. All the co-ops who signed up for the original deals knew they would expire.
Spruce Court does, thanks to federal funding, have the option to break the mortgage early and without penalty. But that means the rent supplements disappear four years earlier, by 2021.
“We want to be able to refinance, so we can repair what needs repairing and keep our building safe and secure,” Edwards said.
“At the same time, we need to keep our subsidies secure. This is our home. We want to protect it for everybody.”
In Ontario, there are 550 co-ops, providing homes for 125,000 people, according to the Co-Operative Housing Federation of Canada. Across the province, 3,600 co-op units operate using a similar agreement to Spruce Court and up to 25 per cent receive rent supplements.
All of those co-ops are set to lose their subsidies once their original deals run out, over about the next 15 years. Thousands of people will be affected.
“All co-ops have this coming. We need a solution to this,” said Edwards. “Now is not the time. Now we have a housing crisis. Because there is no plan in place, right now it means people will have nowhere to go.”
Those original mortgages come with interest rates averaging 8 per cent, with some as high as 13 per cent.
In the past, breaking those deals early to refinance came with significant penalties, but the 2015 federal budget allotted $150 million to CMHC over four years to cover those costs.
The CMHC would not comment on the deal with Spruce Court, but a spokesperson, in an emailed statement, said allowing co-operatives the flexibility to access financing from the private market will help keep rents affordable.
“Lower interest costs will place housing providers in a stronger financial position with the flexibility to strengthen their capacity to deliver affordable housing through lower mortgage expenses, provide the opportunity to finance repairs with private capital, and offer flexibility to transition to more self-sustaining operating models,” Jonathan Rotondo said.
For co-ops that refinance, they will receive rental supplements that end after five years, or end on the expiry date of the original deal, whichever comes first, he said. Co-ops that don’t renegotiate will see the supplements continue until the original deal expires.
“This approach gives housing providers time to transition toward strong financial footing through improved access to private funding.”
The CMHC, as part of negotiations with Spruce Court, did offer to refinance the mortgage at a lower rate, but still with the condition that the supplements end in 2021. The co-op has not accepted that deal.
A spokesperson with the office of Minister Jean-Yves Duclos, said the program criteria, or details of the deal, were clear from the beginning.
“This co-operative applied knowing the criteria, got approved, but then decided to refuse this help,” said Mathieu Filion, in an email. “We received projects from everywhere in the country and approved a series of projects everywhere, in almost all provinces, including Ontario. We feel this program is fair and helps cooperatives on this important issue.”
Tim Ross, director of strategic affairs with the Co-Operative Housing Federation of Canada said “it doesn’t make sense” to make co-ops choose between maintaining their buildings, or their communities and the rent supports.
“There is a perception among some government officials that co-ops can afford to internally subsidize the housing of their lower income members and we know the math doesn’t add up,” said Ross.
Edwards relies on a rent supplement. Both she and her husband lost their jobs over the last six years. Without it, she said, she expects they would have been forced to move.
She grew up at the co-op, after moving there with her father at age 6, and left in her teens, but came back in 2001, and now lives there with her husband and three children.
Spruce Court was built in 1913, at Spruce and Sumach Sts. British-born architect Eden Smith designed the main buildings in the Arts and Crafts and English Cottage style, wrote the Star’s Shawn Micallef, on the co-op’s hundredth birthday. Additional apartments, including where Edwards lives, were added in the 1920s.
“They were built for the working people,” resident historian Paul Mackey, told Micallef. “There was access to the street from all the apartments, lots of cross ventilation, a new invention called the closet, gas stoves, running water — things not available in tenements.”
More than 100 years later, some of the original elements remain, explains Edwards, including creaking pipes, radiators that give off a bit too much heat and closets that were probably fine at the time, but don’t meet modern standards.
Edwards says they are using some of the co-op’s capital repair fund for repairs, including replacing windows, but they need to refinance to get more money.
“There are some co-ops that might be worse off and hardly able to afford anything, other than plaster and spit and hope,” she said.
“We are trying, we are doing what we can, but we are really stretched to the limit and don’t have enough.”