2021 Could be the Year We End the Chatham-Kent Housing Crisis
Is there a solution to the Chatham-Kent housing crisis on the way in 2021?
A tight real estate market. Record sale prices. Properties selling in a matter of days. Easy to sell but nearly impossible to buy. While accurately describing the local housing market, this is not the “housing crisis”. Being unable to purchase a dream property because prices are up is not part of the “housing crisis”. Neither is having too much home, but the only way to downsize involves overpaying for a smaller property. These are examples of “luxuries”, and people live quite comfortably without them. If a person finds that their housing is affordable, does not hamper them from working, and is adequate in safety and amenities, they are not experiencing a housing crisis.
When housing becomes a burden because it’s taking up a disproportionate part of income, then housing is a crisis. When housing is not adequate or does not meet a family’s basic needs, they are experiencing a crisis. When the place they have to live makes it difficult to work because transportation is also an issue, they are experiencing a crisis. If a person is earning low wages, there is a good chance they are experiencing a housing crisis. If a person has to live in motel rooms or a tent, then that person is experiencing a housing crisis.
Five Year Trend Leads to a Chatham-Kent Housing Crisis
How did we, as a community, get here? How did our waiting list for public housing programs soar from just over 200 names in 2016 to around 1,000 in 2020? There are a number of factors but the biggest factor may be that, around five years ago, Chatham-Kent was “discovered” and people from all around the province began to make this place their home.
Five years ago, local real estate was undervalued, and prices reflected this. Homes often sat on the market for long periods of time waiting for a potential buyer to make an offer that was at least close to what the current owner was hoping to receive. Inventory was primarily being traded between residents of the area who were either upgrading or downsizing their living spaces. Population growth for the Municipality was stagnant or declining, reducing pressure on apartment inventory as well. That all began to change around 2016.
Major urban areas in Ontario saw skyrocketing property prices. People living in expensive parts of the province noticed that Chatham-Kent, with its proximity to the Great Lakes and border with the U.S., had extremely low property values. Those who could work remotely or commute were able to sell their urban houses at inflated prices and purchase more square footage in Chatham-Kent than they had ever before dreamed of owning. It was possible to sell a million-dollar home in Toronto and purchase a huge Victorian-style home for $350,000 in Chatham-Kent while banking the difference. This influx of people into the area drove prices and competition higher. At first, the effects were felt at the top end of the market. As those prices increased and inventory began to shrink, those effects made their way through all levels of the real estate market in Chatham-Kent.
This new reality has also had an effect on those who rent apartments. Chatham-Kent’s apartment inventory has been stagnant, with no new builds, for a staggering 30 years. As home price increases reverberated through the real estate market ladder, entry-level homes became more expensive. Eventually, those asking prices began to outstrip apartment renters’ (who wished to become homeowners) ability to afford them.
Effectively cut off from moving out of an apartment, people stayed put, which completely destroyed the turnover that feeds supply. New people continue to enter the market, which then puts pressure on demand. Landlords have also recognized the opportunity to increase profits for their business. With supply low and demand high, rental rates began an upward climb as well. The result in 2020 is, in some cases, a doubling of property values and rents in just a few short years.
Higher mortgage payments and rent are felt by everyone, but the severity of what a person feels depends on income level. Those with higher incomes are able to absorb higher payments with less impact on their day to day lives. For those with lower incomes, priorities in housing shift from “Which luxuries can we afford?” to “Is this at least adequate to meet our needs?” In some cases, people are forced to accept housing that is inadequate because limited inventory and price increases have outpaced the lower-end wage earner’s ability to generate income.
Eventually, as funds run low, those who occupy the lower rungs of the economic ladder begin to be faced with hard choices. Housing payments must be made, but at what cost? Decisions have to be made on where to make cuts. Maybe food, or internet access (try homeschool in a pandemic with no internet), or maybe skip a needed repair on the car and risk losing the ability to get to work.
This group of people is often referred to as Asset Limited, Income Constrained, Employed. That’s a mouthful, which is why it gets shortened to “the ALICE Group.” In a nutshell, it’s a term that describes the “working poor”; those who are not living in poverty, but are right on the line. They have a job, probably have a car and a place to live but there isn’t enough money coming into the household to meet basic needs. Some months are a struggle between rent, food, and utilities.
People who fall into the “ALICE group” work. Often they have full-time jobs that don’t come close to paying a living wage. It’s a stressful way to live from day to day. This is also a group of people who fall through the cracks of social assistance programs. They make too much to qualify for help, while at the same time making too little to survive the next financial challenge, even a small one. They live a paycheck away from disaster.
One of the largest monthly bills that come due each month is for housing. It’s pretty much non-negotiable. In Maslow’s Hierarchy of Needs, shelter and security are two foundational necessities along with food, air, and water. Lacking these basic needs has serious consequences for a person’s quality of life. Forced to juggle rent vs food vs utilities puts huge amounts of stress on people and the family units they inhabit. Having to choose which of their basic needs they are going to focus on each month creates a strain on their social and professional relationships, while also creating an atmosphere where health, particularly mental health, can begin to suffer. Mental health challenges such as depression, suicide, and physical and substance abuse are not uncommon.
Chatham-Kent’s Housing Programs
Chatham-Kent’s Municipal Council recognizes that something must be done. “Being actively involved as a community volunteer in two separate housing developments, there is no question that adequate – and affordable – housing is a fundamental human right,” said Karen Kirkwood-Whyte, Ward 6 Councillor. “It is my belief that new construction, specific incentives for new and existing homeowners, and increased opportunities for those who are seeking rental and other unique forms of accommodation will all come to fruition within Chatham-Kent. Working together, this basic human need can, and will, be addressed.”
Knowing that housing is a critical issue for lower-income residents, Chatham-Kent currently funds a number of different programs to help people afford shelter. All of these programs require that the prospective client must be financially eligible in order to participate. At one end of the spectrum, the Municipality has a few public housing locations where the local government is the owner and landlord. Unit inventory for these buildings is limited, and building more of them is costly. Fortunately, other programs exist to access housing available on the open market.
Rent Geared to Income (RGI) is a well-known program. It is a partnership with local landlords who offer certain units to the program. The renter pays 30% of their monthly income and the city takes care of the difference between that amount and the rent total. The program is limited primarily by inventory, as it is dependent upon landlords offering a portion of their apartment inventory for use.
Inventory limitation for the RGI program is the largest barrier. The Municipality of Chatham-Kent documented this in a report to the council on November 18, 2019. Between 2013 and 2018, the number of people on the waitlist for RGI housing nearly doubled, from 429 to 834. This is an average increase of just over 14% per year. Shockingly, that rise came mostly in 2017 and 2018, with a 43% and 34% rise respectively. On average, only 2% of apartment inventory as a whole becomes available at any time, which would mean RGI units are incredibly scarce. Very clearly, the inventory resources dedicated to the RGI program are not sufficient to meet the need.
In 2018, Chatham-Kent introduced the Portable Housing Benefit, a program that allows people to find housing anywhere in the Municipality at market rates. Again, the tenant pays 30% of their monthly income while the program makes a direct deposit into their account for the balance of the rent. This has the benefit of allowing people to compete for open rental units anywhere in Chatham-Kent. It would seem that this program is only limited by the budget allocation decided by the Municipal Council and the availability of market-rate units across the community.
A New Way of Thinking
A primary cause of the current Chatham-Kent housing crisis can be traced back to the abnormally low property values and rental rates from the past years. These low price values have stunted developer investment over the years. Developers will generally look for the greatest investment opportunity, and for Southwest Ontario, this meant that the prices available in London and Windsor were preferential. Only recently have Chatham-Kent’s rent and property values rose to be in line with neighboring regions.
It takes more than competitive pricing rates to attract developers, as they still have to build. One of the newer tools that Chatham-Kent’s economic development team has in their toolbox is the Community Improvement Plan. This plan contains a number of incentives that can be offered to a potential developer, enticing them to commit to investment in the Municipality. Speaking of this new approach, Councillor Brock McGregor said, “Basically we changed the development charges on large multi-residential [developments] and used Development Improvement Programs, like we’ve used for other categories and specific areas in the past, to make projects less expensive to develop.” Many of these incentives give up short term gains in order to realize larger benefits down the road.
The Piroli Construction apartment development on Park Ave W. is the first of a few new apartment builds planned for Chatham-Kent and is the first fruits of this new approach. The Piroli development qualified for the Tax Increment Grant, which will aid in the recovery of certain costs paid by the builder to the Municipality. As the build is completed, and the new property tax rate assessed, there will be an increase in the amount of tax revenue over what the undeveloped site had been generating. Eligible costs are returned to the developer through a sort of “rebate” until those costs are paid off, or 10 years, whichever comes first. Incentives like these, along with a concerted effort to reduce red tape (which was spearheaded by Mayor Darrin Canniff and Municipal Council), have made Chatham-Kent desirable for investment once again.
The availability of housing at affordable prices is one key element needed to attract new business to Chatham-Kent. Housing inventory is a metric that businesses looking to expand into a new community will examine. If there is no place for new hires to live, the company won’t be able to attract new hires. In the current economic climate, industry will be looking to hire from the existing population, while also hiring from outside the community. The existence of new, higher-wage job opportunities benefits people who are struggling to make ends meet. New job opportunities are part of the solution to the housing crisis in Chatham-Kent.
The Municipal strategy here will rely on market forces to create a stabilizing effect on prices and rents throughout the entire market and public housing strategies ready to take advantage of the changing housing climate. Easing the pressure on demand by increasing the supply of available inventory should produce this effect. Even the construction of $300,000 homes should have a trickle-down effect as they create more inventory in the upper-middle range of the real estate market and ease demand pressure on lower price points. However, the end results won’t be known for a couple of years.
Municipal Council has The Power to Make The Difference in 2021
As Council heads into its annual budget deliberations later this year, they will have an opportunity to make a marked impact on the Chatham-Kent housing crisis. Increasing the budget of the Portable Housing Benefit now will allow municipal staff the opportunity to prepare recipients beforehand so that they are not left behind when the new apartments become available. It is important that funds, and participants, are available before the new housing is ready because the new inventory will fill quickly.
This increased budget could quickly benefit hundreds of people whom the Municipality has already recognized as needing help. After all, a waiting list is simply the recognition that someone in need is being denied due to a lack of resources.
These housing programs provide tangible benefits not only for those who use them but for the community as a whole. Families and people under stress can break down, and this breakdown can often lead to significant costs that are borne by the whole community through increased contact with the police, substance abuse, and trips to the emergency room to deal with declining health or the results of abuse. Kids are perhaps the most affected by the experience of living in poverty. Research has shown that the impacts of poverty can negatively impact a child’s emotional and physical needs along with their educational achievement. All things that have life-long consequences.
Assisting people in obtaining adequate housing removes one large stressor from their lives and can be the difference between opting into, or beginning to drop out of, productive society. Housing people is not cheap, but it is the right thing to do. Our current Municipal budget stands at just over $331,000,000. Of that, $279,336 is allocated to the PHB program. Ray Harper, the Director of Housing Services in Chatham-Kent relates that currently there are 77 benefits being used in the community at an average cost of $259 per month. This provides a significant benefit for our community vs the cost of providing the aid, and it’s something Chatham-Kent should be proud to have implemented.
Solutions to public problems do not come without a cost. In an era where the public demands that the Municipal Council finds ways to avoid increasing the tax burden in Chatham-Kent, this is an instance where spending money benefits everyone. New rental inventory will be coming online over the next few years. By allocating an extra $1,000,000 we could supply around 250 more benefits. This would make a huge dent in the waiting list, get people into better situations, and decrease the harms that could affect our community as a whole. All the while, the Economic Development team will be continuing their work to attract new jobs to the area, an area that will now have more and better places for people to live.
This is one of the rare cases where, if inventory were high enough, our Municipal Council would be able to spend its way to victory if they had the will and the blessings of the people they represent. But even with the realities in the amount of housing available, a bold stand here will make a demonstrable, positive difference for Chatham-Kent.
Stock Photography Courtesy of pexels.com / Piroli Development Courtesy of Municipality of Chatham-Kent
Councillor Karen Kirkwood-Whyte’s comments taken on October 7, 2020 / Councillor Brock McGregor’s comments taken on September 28, 2020
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