Legislative Assembly of Ontario

ANNUAL REPORT, PROVINCIAL AUDITOR, 1992
MINISTRY OF HOUSING

CONTENTS

Thursday 11 March 1993

Annual report, Provincial Auditor, 1992

Ministry of Housing

Daniel Burns, deputy minister

STANDING COMMITTEE ON PUBLIC ACCOUNTS

*Chair / Président: Mancini, Remo (Essex South/-Sud L)

*Vice-Chair / Vice-Président: Cordiano, Joseph (Lawrence L)

*Acting Chair / Président suppléant: Callahan, Robert V. (Brampton South/-Sud L)

Cousens, W. Donald (Markham PC)

*Duignan, Noel (Halton North/-Nord ND)

Frankford, Robert (Scarborough East/-Est ND)

Haeck, Christel (St Catharines-Brock ND)

*Hayes, Pat (Essex-Kent ND)

Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND)

O'Connor, Larry (Durham-York ND)

Sorbara, Gregory S. (York Centre L)

*Tilson, David (Dufferin-Peel PC)

*In attendance / présents

Substitutions present / Membres remplaçants présents:

Fletcher, Derek (Guelph ND) for Ms Haeck and Mr Frankford

Harrington, Margaret H. (Niagara Falls ND) for Ms Haeck

Kormos, Peter (Welland-Thorold ND) for Mr Frankford

Marchese, Rosario (Fort York ND) for Mr Johnson

Marland, Margaret (Mississauga South/-Sud PC) for Mr Cousens

Poole, Dianne (Eglinton L) for Mr Sorbara

Sola, John (Mississauga East/-Est L) for Mr Sorbara

Winninger, David (London South/-Sud ND) for Mr O'Connor

Clerk / Greffière: Manikel, Tannis

Staff / Personnel: Richmond, Jerry, research officer, Legislative Research Service

The committee met at 1014 in room 151.

ANNUAL REPORT, PROVINCIAL AUDITOR, 1992
MINISTRY OF HOUSING

The Chair (Mr Remo Mancini): The standing committee on public accounts is called to order. The committee is in its third day of public hearings regarding the 1992 annual report of the Provincial Auditor as it relates to non-profit housing, section 3.12 of the auditor's report.

I want to say good morning to all of the members.

Mr David Tilson (Dufferin-Peel): Good morning, Mr Chairman.

The Chair: Thank you, Mr Tilson.

Mrs Margaret Marland (Mississauga South): Mr Chair, I'm wondering, since we're starting the meeting at 10:18 --

The Chair: It's 10:15.

Mrs Marland: -- at 10:15, if we could have a consensus to sit to 12:15 so at least we get our two hours with the deputy minister here this morning.

The Chair: I was here, ready, just before 10.

Mr Tilson: You were indeed.

Mrs Marland: You were indeed, and we would be happy to take the chair at 12 noon. I'm just asking for the extra 15 minutes so we can have full rotations.

The Chair: Do we have consensus to sit until 12:15?

Mr Noel Duignan (Halton North): No.

The Chair: I don't see consensus.

Mr Tilson: They don't want to hear any more, if they don't show up until 20 after.

Mrs Marland: It's really interesting. We had Mr Winninger here at 10 o'clock; we've had nobody else here. So I think you should be amenable.

Mr Rosario Marchese (Fort York): Excuse me, I was here.

Interjections.

The Chair: Okay. I thank the members for their advice on the morning scheduling. I think we should get right into questions and answers. Let's see, how much time do we have here?

Mr Marchese: Do we have 40 minutes each?

The Chair: I'm sorry, what was that, Mr Marchese?

Mr Marchese: Do we have 40 minutes each in the first round? Is that the way it's going to work this morning?

The Chair: You have 20 minutes.

Mr Marchese: We have 20?

The Chair: Do you want more?

Mr Marchese: No. She was suggesting we extend it 15 minutes. But if we all reduce the time so that we all have equal time, that's the point, right?

Mrs Marland: The point is that we were to have two hours this morning.

The Chair: We discussed that point, thank you. I appreciate the advice I received from Mrs Marland; it was well taken. You have 20 minutes, Mrs Poole.

Ms Dianne Poole (Eglinton): I'd like to start with your non-profit housing program expenditure review.

The Chair: Oh, I'm sorry. Prior to the opening of the session, the deputy minister told me that he had some information for the members. Mr Burns, do you want to tell us what you have and we'll get it distributed right away. My apologies.

Mr Daniel Burns: These are two items from yesterday's discussion. One is the extract from our Housing Field Operations Directive, dealing with conflict of interest. The second is a small chart that responds to a question asked by Ms Poole yesterday about what our actual subsidy levels are, looking at the program from different points of view.

The Chair: Thank you.

Mrs Marland: We could still proceed, Mr Chairman.

The Chair: Yes, please proceed.

Ms Poole: Since we now have the information from one question I asked last night after the end of the session, I'd like to review that.

My question, for members' information, related to one of the pie charts in the original set of graphs that the ministry had given us on Tuesday. There was one pie chart called "Typical Capital Cost of Non-Profit Housing, Sample Project for Families in Metro Toronto, 1991," and on that cost-per-unit pie chart, it said that the construction costs on this sample family non-profit housing project were $94,381 for this unit, which was 65.6% of the capital cost for that unit, and the total cost for that unit was $144,044.

A bit later on, there was a chart which had the average construction cost per square foot for the Toronto census area. When I looked at the January 1991 average construction cost per square foot, it was 61 cents per square foot --

Mr Burns: Dollars.

Ms Poole: Sorry, $61 -- 61 cents, that's a real bargain. I think we should build much more housing at that rate. Then I went over to the pie chart and did a little math. My math isn't always the best, but I thought I could cope with this.

When I looked at 65% of the construction cost, or 65% of the cost going into construction, I then figured out it would have to be a 1,500-square-foot unit to have cost $144,000 with those particular figures. I thought I was missing something and then I asked the ministry to provide me with an analysis of what I'm missing or what they're missing. Why do these facts not compute?

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Mr Burns: Essentially, because what we roll up as construction costs in our program tracking doesn't contain all the same components that the real estate board's construction cost index contains. We are presently working on a direct comparison of this building to the way they break down their construction cost index. If it comes this morning, we'll give it to you; if it doesn't, we will write you with all of that information.

Ms Poole: What types of construction costs would the non-profit sector have, or what differential than the private sector?

Mr Burns: We would include in ours anything that we did to prepare the site, including dealing with contamination, and theirs doesn't, for example. This is an example of a cost item that is in one calculation and not in the other.

Ms Poole: Could you give us a few other examples of the types of things that would incur a cost for a non-profit project that would not be taken into account for the private sector?

Mr Burns: They're all taken into account; it's just whether this construction cost envelope contains the same cost elements as the other.

Ms Poole: I'll rephrase that: whether they're taken into account when you're trying to compare the average price of $61 per square foot and why -- my calculations, if this was an 800-square-foot, two-bedroom apartment -- maybe this particular project had larger units, but based on what the ministry was saying earlier about the average size of a two-bedroom apartment being 800 square feet, when I factored that in, I got $117 per square foot, which is a significant difference.

I know soil contamination is a real problem and a very expensive one that we've had to deal with, but would there be other factors that would drive your construction costs up significantly more than the private sector's?

Mr Burns: When I say "site development," that includes demolition and the servicing, beyond remediation, that's required on the sites. It's in our number; it's not in the Toronto Real Estate Board number. The two numbers treat financing costs differently. But as I said, we're charting the specific costs elements of the TREB method in ours, and we'll provide you with the whole breakdown as soon as I've got it.

Ms Poole: Okay. Perhaps we'll leave that one for the moment, then, and go back to the non-profit housing program expenditure review. The recommendations in this particular review will be in place for the proposal calls going out later this month for the 20,000 units?

Mr Burns: The program review was undertaken in the fall of 1991. When you do a program review, you look at all your cost elements and then you look at those areas where you think you can make some progress. What we're in the middle of is a three-year effort to tackle all the cost elements in the program. That doesn't just include the new program; it includes going back and looking at costs in the existing program and tackling them while we can.

In earlier parts of this discussion, we touched on a few of the important elements of that: utility costs, refinancing, the establishment of norms on the operating side, not just on the capital side. That work has been trying to move to an incentive-based operating budget, for example, as opposed to just an envelope, and there is a three-year work plan that we're in the second year of that relates to the objectives of the program review.

Ms Poole: I want to ask you about a few of the items in here. For instance, on the second page at the bottom, A.6 said "Review funding of replacement reserves," and then (a) was "Two-year moratorium on the funding of replacement reserves."

Could you please explain whether there were difficulties that were identified by the ministry with reference to replacement reserves? Were they too high? Were the non-profit projects not utilizing them properly? What would be the reason for, first of all, putting that in as part of the review and, secondly, calling for a moratorium? Did you have any belief that this program was not working adequately which caused you to put that in?

Mr Burns: We touched on this in yesterday's discussion. There are a number of things about the replacement review that we believe needed intense scrutiny and re-evaluation. One is the basic historical notion that an appropriate annual replacement reserve funding is 0.65% of the capital cost, irrespective of the form of building, where it is, whether it's a purchase, rehabilitation or a new construction. We used again a blunt instrument, one guideline for the whole system. We wanted to go back and look at whether that should be differentiated and whether the absolute level made any sense.

Two, there are some very interesting possibilities that arise when you look at the way the current funds are administered. At the moment, we don't allow any non-profit cooperatives that are operating more than one budget to pool their replacement reserves, so an organization like Peel Non-Profit Housing Corp has 40 of them, accounted for separately, dealt with separately. A lot of people have been arguing for a while that pooling would make more sense for an organization with a portfolio of several budgets, so pooling is a thing we're looking at in terms of policy review.

Ms Poole: Just a point of clarification: When you're talking about pooling, are you talking about having a pool for a group of buildings or all buildings?

Mr Burns: We're talking about two kinds of potential pooling. One is to look at, for those non-profit sponsors that have many different buildings and many different budgets and operating arrangements with us, whether it's more efficient in management terms and in expenditure planning to pool it. The second is to look at whether individual non-profits and cooperatives could join a pooling scheme. For example, the non-profit cooperatives by and large are independent, separate organizations, but perhaps all of them as a group, or many of them, might be interested in a pooling scheme that would allow them to manage the replacement funds on a broader basis than individual projects. That might be more efficient. It might allow us to effectively protect buildings in the longer term with a lower level of annual support. That's the second thing we've been looking at.

The third issue we've been looking at are the administrative rules that surround the management of those funds. At the moment we require people who hold replacement reserves to manage them in an extremely conservative way, which means they're held in the lowest interest-bearing accounts that are really available in the marketplace. So another option, particularly if you have some pooling, is to look at whether we would permit different forms of investment. With pooling, for example, you might be able to invest some of it in the longer term, achieving higher rates of interest. It may be possible, in fact, to have professional fund management, if the pools were large enough, and achieve higher rates of interest again. Inasmuch as the replacement reserve funds themselves can grow internally through more remunerative investment practices, it may reduce the need for annual contributions.

So are there reasons to review replacement reserves, the level of them, the way they're managed? Could that be more cost-effective for everyone involved? Absolutely, and those are all the reasons, and we are doing those things now.

The moratorium, however, was put in place because it allowed for a significant reduction in our operating subsidies immediately, while for some of the other things we were looking at which would take more time to grapple with, like utility costs, we could sort through and make those cost reductions effective.

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As I said yesterday, while we declined to contribute to our replacement reserves comprehensively, we did retain in the program funding envelope some flexibility on our end to ensure that if anybody got caught out in the actual two-year period, they could have some access to funding at our end. We didn't simply create a situation where there was absolutely no recourse or alternative if people had a legitimate local need. We took the view that this was a reasonable short-term measure, partly because a great deal of the stock is pretty new in these programs, as we know from looking at the charts of growth. So it's part of the first two years of the program, as we come to grips with other cost elements.

Ms Poole: It appears I don't have a lot of time left for this round of questioning. There was one thing I did want to ask you about: the ministry's database. There has been some criticism over the last few days, and indeed implied in the auditor's report, about the ministry's capacity to give the information that the auditor deemed necessary to really find out what was happening.

We accept your explanation that some of it is just extremely difficult because it's difficult to make direct comparisons between the private and non-profit sectors. But it seems to me that there is a great deficiency in, perhaps, the sophistication of the computer system and your ability to collect data.

The question I have for you relates to CMHC, which I think is the acknowledged leader in Canada for collecting data, for giving statistical analysis. They've certainly been seen as a most reliable indicator of what's happening not only in non-profit and subsidized housing, but generally in housing I think their statistical analysis is seen as very superior.

With the backing out of the federal government in housing and the offloading of housing responsibilities from the federal government to the provincial government, I would assume that CMHC has this huge, sophisticated bank of computer centres that could churn out magnificent information which you would love to get your hands on. Have you approached CMHC to see whether the province of Ontario can utilize some of those resources, whether you can perhaps transfer some of your database to theirs? It seems to me that there may be a resource there that is going to waste at the moment, which the province of Ontario and the Ministry of Housing sorely need.

Mr Burns: There are two points to your question that I want to touch on. We do have an intimate and ongoing relationship with CMHC. There are several national working committees; there's also one just with us, because Ontario is a region in the national scheme of things. So we have a particular ongoing relationship here on a whole series of operational questions. There's also a national research committee which we participate on which discusses data needed to look at policy issues. I just want to make a couple of distinctions.

Our ability to derive data from our project base information system for policy work is limited. That is the problem. Some of the discussions today, of course, bear on those kinds of questions. However, on the other side, we do collect, in the course of delivering the program, a tremendous amount of data on the project level that's contained in the regional office that has the business relationship with a particular sponsor. Those data are there and can be looked at at any particular point in time in relation to an individual one.

The amount that is pulled out and reported back on the general system so far is there to monitor our expenditures and to monitor the mileposts in program delivery, so there for program delivery or administrative purposes. That's different in turn from the kind of database an auditor would want to look at particular issues. There's been a bit of discussion about actuals. When we say "actuals" in our world, we mean the final audited costs of a development project. There are interim costs in our files and there are forecasts, but the actuals don't get put in place until the very end. So it's not that we don't have data in files as we deal with a project. They aren't actuals in that sense; that is, they're not the final data.

We do have in place, and really only in the last year, a technical system that ties together the pieces of our operation, but the application of new kinds of programming and connecting of data to our policy needs is ongoing now. There are weaknesses with it, as I said yesterday.

The Chair: I thank the deputy minister for his answer. Ms Poole, your time has expired. Mrs Marland, 20 minutes.

Mrs Marland: Yesterday, we had quite a lot of discussion around the subject of the consultants. I think some of the questions that have been raised by my colleague Mr Tilson on the subject of consultants are very relevant, very important questions.

This morning you handed out a Housing Field Operations Directive dated November 24, 1992, and the subject is "Conflict of Interest Provisions." Is this the first directive from the Ministry of Housing on this subject of conflict-of-interest provisions or was there a previous directive from the ministry?

Mr Burns: I think I said yesterday, and I just confirmed it with Mr Schafft, that this is the first formal, written directive the ministry has issued on conflict-of-interest guidelines. What we did in the past was to operate on the basis of a practice which was understood and discussed but was not codified in the form of a directive.

Mrs Marland: How long has the Ministry of Housing been in the non-profit housing program?

Mr Burns: The ministry's had comprehensive responsibility for program delivery in the province since 1986. I think I mentioned that the first day I ran over some of the history. Before then, it did participate with the federal government in some programs, but it was responsible for delivery, so since 1986.

Mrs Marland: So for seven years we've had this program in effect in this province, and for all of that seven years it's involved the use of consultants. Am I correct?

Mr Burns: Yes.

Mrs Marland: And it's taken six of those seven years before we've come up with a written conflict-of-interest provision directive from the ministry -- kind of a scary thought, I would suggest.

I want to bring to your attention a situation that apparently existed in 1988. I'm going to read the notes on this particular matter. Apparently, in 1988, I think the latter part of 1988, this came to light. A firm existed called Classic Consultants. I don't know if this still exists, but apparently Classic Consultants found land for the Barrie Municipal Non-Profit Housing Corp.

"The president of Classic Consultants was a Donna Hamilton. Her husband, Rob Hamilton, was a principal of a numbered company which bought a piece of property in January 1987 and sold it to the non-profit housing corporation in September 1988 for $890,000, which is more than twice what he had paid for it."

"Neither the city nor the non-profit housing corporation obtained an appraisal of the property. Instead, they took the advice of their adviser, Classic Consultants, on the land's value (remember, Hamilton's wife, Donna, is the president of Classic Consultants).

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"Donna Hamilton did declare a conflict of interest when the sale was recommended at a non-profit housing corporation meeting on June 8, 1988, albeit without giving a reason," and under the conflict-of-interest laws in this province I understand that when you declare a conflict you also have to declare the reason. So she did declare the conflict on June 8, 1988, without giving the reason. "However," -- and I think this is really interesting -- "she did not declare a conflict at the August 3, 1988, meeting when the housing corporation and Classic entered into a development contract for a fee of $1,500 per unit on the property!"

Another little side piece of information regarding this Barrie municipal non-profit housing corp, which is just a further confirmation of some of the points Mr Tilson was making very well in his questions yesterday and the previous day, was that a year earlier to this matter that I've just raised, in August, 1987, Barrie's planning director, a person by the name of Rick Jones, left the city after 13 years to go to work for Classic Consultants as a planner. Rick Jones also sat on the board of the Barrie Non-Profit Housing Corp.

I don't know where you could get a more incestuous relationship as an example of the kind of thing we're trying to bring to the attention of this committee in terms of what it is these consultants do and who the consultants are and what it is they're capable of doing in this particular program of your ministry.

Were you the deputy in 1988? I don't think you were.

Mr Burns: No, I was not.

Mrs Marland: And I'm sure that you don't have the facts of this particular case in your Encyclopaedia Britannica mind, but how do you feel about -- I'm not going to ask you how you feel, because you don't want to express your feelings.

Mr Tilson: You're not allowed to.

Mrs Marland: What is your reaction to this example, and I don't wish to have the answer, "Well, since November 1992, we now have a written directive." My concern is that obviously this is just an example that has been brought to my attention. I think what we need to know is, why is it that the ministry's been in this program for seven years, and this is an example which took place four years ago -- I guess the bottom-line question is, why are consultants needed? If a church group or a sports group or a community group goes to the ministry that gives out funds under Wintario programs for community projects, it's not told that it has to hire a consultant, nor does it need to hire a consultant, because that ministry provides it with -- I think the title is coordinator or counsellor or whatever for the project. In other words, the ministry staff help that local community group with its program and with its application.

Obviously, when this consulting aspect that's involved with these non-profit housing programs involves so many millions and millions of dollars in the program itself, to the cost of the taxpayer solely, I think we need to know why they need it. When you answer that question, I also would like to know why they are paid on a fee percentage of the project. If you're going to say they're needed, then I want to know why they're paid a percentage of the cost of the project, because most of these projects are within the same range of number of units and the amount of work would be the same.

Mr Burns: With respect to the case that you've raised, your speculation is accurate. I don't have it in my own memory nor in fact in any of the advisory material I have with me. So I'm going to have to take it that you've put the question to us and we will go back and review that material.

Mrs Marland: When you review it, will you give the committee a written answer about what was done about this particular case?

Mr Burns: Well, I don't know what the normal protocol is. I'm certainly prepared to write to whoever it is who's asking for the material, if it's yourself or the Chair of the committee.

The Chair: I think in view of Mrs Marland's request, you can direct the answer to myself, and the clerk and I will distribute the information to all members of the committee, including the auditor.

Mr Burns: That's fine. You have my undertaking to do precisely that.

Just a small comment on conflicts of interest. While there are particular standards for conflict-of-interest declarations in the municipal system, in the broader business context there isn't a law about what are or are not acceptable conflicts of interest. There's obviously practice and there are some court cases and things, but there's a difference in backdrop between that and the standard applied to the municipal situations.

Why do we have project managers in the system? Because a real estate project, the development of a building or the purchase and rehabilitation of a building, requires project management. I think I've said a couple of times in the course of this discussion that there are several ways to get, acquire, have, demonstrate that you've got the project management skills on your team. In the case of some organizations, and particularly the municipalities, they have it as a part of their permanent staffing arrangement. This funding line goes to support the professional development staff of Peel Non-Profit Housing Corp, for example, when it's doing its own development.

Second, some people use municipalities to get that project management capacity that you need to deliver the building.

Mrs Marland: But Dan, Peel Non-Profit doesn't use consultants. I'm asking you about the community groups who pay these enormous fees to consultants.

Mr Burns: Right, but you asked me the question, "Do you need project management?" essentially, "Do you need development consultants?" The answer is, you need project management. There are several different ways that's brought to the system: In some cases, people have relied on professionals who bring another service to the table, like engineers or architects; in some cases, they've relied on people whose specialty is project management in a real estate context; sometimes those are people who do most of the work in the private sector and some in this, and sometimes they rely on people who specialize in this particular kind of project management. Our requirement is that you have to have competent project management as part of your team or we won't accept that you have demonstrated the capacity to carry out a real estate project. That's the first part.

Mr Tilson: Mr Burns, you don't get around to talking about project managers until after the building's up or until the building is rolling.

Mr Burns: No, I mean people managing the development project.

Mr Tilson: All right, that's who the consultant is.

Mr Burns: In many cases, that is what is called in the parlance a development consultant, but not in all.

Mr Tilson: Whether you call it a consultant or a project manager, the question is, why do you need these people?

Mr Burns: Because to deliver a real estate construction project or a purchase acquisition project, you have to have in that work someone who ties all the pieces together and manages it through. Some people have that in their organization, some people hire it -- there are several places to hire it -- but you do need that capacity to deliver the project.

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Mr Tilson: Nothing can happen without the ministry's approval -- nothing. It's in all the contracts; it's in all of the arrangements. There's no question that the consultant or project manager, whatever you call this person, is continually dealing with the ministry.

Mr Burns: Yes. That's one of the things they do.

Mr Tilson: You have to cross your t's and dot your i's. You simply can't move.

Mr Burns: Yes.

Mr Tilson: So if you have to do that anyway, the ministry people are continually reviewing everything that is being done during this project.

Mr Burns: We don't offer project development services as part of what we do. We're not in the development business. We're delivering a project.

Mr Tilson: I'm afraid that's what non-profit housing has become.

Mr Burns: Non-profit housing is a part of the development business. We are not.

Mr Tilson: It's a development business. I mean, these people are producing books saying what wonderful jobs they're creating. Non-profit housing is a development business, and the Ministry of Housing is in the development business.

Mrs Marland: You give them the money.

Mr Tilson: You give them the money. You give them the expertise. You don't allow them to move.

Mr Burns: We provide funding, that's absolutely right. Let me just go on to the fee question, which is the last part of your question.

Mr Tilson: I don't want to leave the issues of fees, because we still have to talk to the issue of the need of the consultant. Non-profit housing has got to an unbelievable expense, and I think you, ourselves, the auditor, everyone is trying to produce this thing. If we're going to continue on with this policy -- which I must confess people in our party are reluctant to do, but we're going to be doing it for the next couple of years, it appears -- are there ways of doing it in a better way, a more economical way?

Mr Burns: Yes.

Mr Tilson: The question that we're raising is, is there a need for the project manager, particularly when you have people from the Ministry of Housing who are overseeing these projects anyway? You can't complete these projects without the approval and without the authorization of representatives from the Ministry of Housing. That's the question.

Mr Burns: Our perspective is that you do need competent project management to deliver development projects.

On the question of fees, I think I said yesterday, and I'll just touch very briefly on this, the origin of the 2% guideline is in a federal-provincial piece of work from about 15 years ago, 1978 or 1979, which was based on an examination of the services provided in their program, and that guideline was followed for a long time.

What we have done in the last 18 months, though, is move away from a general guideline towards a concrete fee-for-service proposal and costing system. One of the results of that is that the amount of money in this budget line has been dropping and our current level of funding in this particular part of it is 1.4%, not 2%.

Mrs Marland: Why is it a percentage? Why don't you make it a fee for service based on a project?

Mr Burns: That's exactly what we're doing. But to give a sense of how much money that's costing us in relation to the whole, that's why I gave the 1.4%. We're not using a guideline now. We are using fee for service based on a work plan, costed. We are moving to real costs.

Mr Tilson: The best part of this for the consultant is: The bigger the project, the bigger the cost of the real estate, the more lawyers you hire, the more architects you hire, the more it's worth, because the consultant gets a percentage of all of those costs.

Mr Burns: We're not using a straight 2%-of-capital-cost system. We're using a real cost system based on a fee-for-service proposal, a work plan that's costed. That's what we are now doing.

Mr Tilson: When did that change, because that hasn't been the way it's been.

Mr Burns: That's right. That's not the way it was at the time of the audit. In the projects the auditor looked at, there was a much more general use of broad guidelines. In the fall of 1991 we were closing out Homes Now, P-3000, P-3600; in other words, the programs that were the subject of this audit earlier in that year essentially. We changed our practice in that fall to insist on real costs, work accomplished, and I think someone -- I think Ms Poole or perhaps you did actually -- alluded to the fact that we rolled back fee submissions in that period of time. It's the period of time you were looking at. Those were the beginning steps of this program.

As we went on into 1992 and began to look at project proposals under the P-10,000 program and on through federal-provincial in that year, we switched to real work plans, real fee-for-service proposals and those being costed not on a guideline related to capital costs.

Mrs Marland: They're not a percentage any more.

Mr Burns: That has resulted in a percentage number of 1.4, but that's not because we're using a percentage guideline. In fact we've shifted away from a guideline to real fee for service, real work plan, real costing.

The Chair: You'll have to follow up your questioning in the next 20-minute opportunity. Mr Marchese and then Mr Winninger.

Mr Marchese: Mr Burns, again to pursue the question Mrs Marland was raising earlier on, because the argument they make is, "You don't need the project person, the consultant to do the work. You're saying it's an additional costly layer. Why not allow the province to take care of that, given that you have to approve every single part of it anyway?" because they're saying, "Why not just eliminate that consultant who gets that 2%, 1.4%, whatever it is that the person gets? It's very costly," I can appreciate what they're saying.

But if you could explain again, because I think you said it, but it would be useful to repeat, the ministry doesn't necessarily, on a step-by-step way, say, "This is what you've got to do in order to bring the project to development or to fruition." What you're saying is, "We're not in the development business in the sense of the development of the project," which is what I believe you're saying.

If you could speak to that, there might be some clarity as to why it is that the non-profit group requires somebody to take it through its process, because the ministry doesn't have the additional staffing to help these groups in that way. Is that the issue or is there more?

Mr Burns: We don't have a direct development capacity and have not in this province since the Ontario Housing Corp wound up its direct development activities in 1974. The model that's been followed nationally and provincially, as I said in my opening remarks, has been one of supporting community housing organizations of various sorts -- municipalities, non-profit cooperatives and community organizations -- that want to provide housing locally.

We have provided programmatic support to their efforts. We have not provided direct development resources or direct property management resources. To be frank, I think you get a more efficient, cost-effective delivery of this kind of program if you depend on marketplace transactions than if you build up, as we had in the 1970s, a large central development capacity. It's inconsistent with the philosophical perspective that's imbedded in all of the non-profit programs, nationally and provincially, since 1973 that the object of the program delivery is to support community-based housing operations.

Mr Marchese: Does Peel Non-Profit get the same percentage of support? Does it get 2%?

Mr Burns: They, like everyone else, have been subjected to our change in practice, but for some time they would have got 2%. Certainly the city of Toronto did when I was there. We used it to fund our development staff, our project management at the development end. Peel and all the other municipal non-profits are eligible for that element of funding. We have now also with them said we want to be convinced that we're getting value for money in that line, but they are all eligible to get some financial support in that line.

Mr Marchese: Are you aware of the municipality ever wanting to refuse it because it felt it didn't need it?

Mr Burns: I've never run into a municipality doing that.

Mr Marchese: Could you repeat that?

Mr Burns: I said I've never run into a municipal housing company doing that.

Mr Tilson: You don't get the allocation unless you've got a consultant.

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Mr Marchese: Okay. Can I move on to the issue of access, because that's a matter the auditor has raised concerning the ease with which needy people can access non-profit housing or any kind of housing. What has the ministry done or is doing to make it easier for people with disabilities, for the needy, those who are less resourceful, to have greater access to our housing?

Mr Burns: I think we touched on some of the principles in this area yesterday. Just to begin with those, to establish a small context, in the public consultation on the non-profit and cooperative programs that took place in 1991, one of the issues put out for discussion was the access arrangements as they existed at the time. We got quite a lot of submissions on that subject.

In Consultation Counts, which is the response to that public consultation process, access figures importantly. What's laid out in there is an objective of creating a situation where people can find it a lot easier to connect themselves to the doorways that would lead them to tenancy and non-profit or cooperative housing.

I think I touched on a couple of places where we've developed some pilots or approaches to this. One was Hamilton, which ties together a lot of the providers in Hamilton. Another was the seniors' housing registry which is in operation in Metropolitan Toronto. Beyond that, we have made it a mandatory requirement of participation in the new program that people adhere to a more coordinated access system than has existed in the past.

I think I'll go on from that and just touch on some of the specific notions that we're working on with providers that are intended to address the access question. Perhaps I should just parenthetically say that part of the problem that's emerged has to do with the rate of growth. If we look back 10 years ago, there were far fewer non-profits or non-profit cooperatives, and it was a good deal simpler to find your way to the doorways than it is today when we have a far larger number of providers.

Perhaps I should just finally say by way of introduction that the auditor's comments on weaknesses on the access side and difficulty are quite consistent with what we heard in the consultation and quite consistent with what we believe to be weaknesses of the system internally that need addressing. I think we said that in our response to the auditor's report last year.

On the question of consistency, here are some of the points that we are focusing on:

-- That housing providers must accept applications. They can no longer close waiting lists in the future, as some do now.

-- That all housing providers should list themselves in the Yellow Pages in a place that's consistent and accessible.

-- That housing providers should clearly indicate that they operate within the framework of the Human Rights Code.

-- That housing providers from time to time have to make it clear through public information of one sort or another that they do have a waiting list or they do have vacancies.

-- That housing providers must participate in a community housing directory, if there is such a format in their community.

-- That the Ministry of Housing, which set up a 1-800 housing number, should provide access to people who can't find local ways in.

-- That we explore other electronic and telephone-based systems for creating access to information and the doorway to non-profit and cooperative housing.

On the question of a more equitable system, the kinds of things we're looking at and we're working towards with the people who operate non-profit and non-profit cooperative housing are ensuring:

-- That in no case are fees charged at the time of application.

-- That application records are kept in a way that allows the chronology of applications to be understood and responded to, that is, "When did you apply and where are you on the list on a chronological basis?."

-- That if there are priority-setting policies that the non-profit or cooperative has in place, they're made available to anyone who does apply. For example, Cityhome, in the city of Toronto -- its access policy is chronological; the Metropolitan Toronto Housing Authority's is based on a needs assessment system, so if you arrived at the front door of either one of those, you should be advised as to the precise nature of their priority-setting system.

-- That housing providers, individually and in a group, should be in a position to explain the spectrum of housing available in the non-profit sector in a community and where that's located and what their options are.

-- That the priority of particular needy groups in the system, and I'm thinking here of victims of family violence, for example, should be clearly understood and applied throughout the system.

On the third issue, efficiency:

-- That the methodologies that are used should be simple, quick, effective. Some parts of our system use fairly complex assessment and ranking systems.

-- That housing providers should be in a position to advise people quickly and accurately where they sit within any particular priority system. If you call up in a chronological system, where are you, or in a needs-based system or in a mix.

-- That the Ministry of Housing clearly indicate, on a broad basis, what it's prepared to do to support community efforts to bring together providers to improve access. I think I said yesterday that we've been operating on a pilot or one-off basis, but we want to establish a foundation to support community-based efforts broadly and in the longer term.

That gives you, I think, a sense of the kinds of specific issues we're looking at to improve access in response to Consultation Counts and in response to the auditor's report and in the design of the new program.

Mr Marchese: That's quite a comprehensive list, I would say.

Can I ask in connection with all of this, would you say that lack of literacy continues or will continue to be a barrier and that perhaps some of the things we have suggested here may still not be adequate in terms of reaching those whose literacy levels are very low and where there are language barriers perhaps?

Mr Burns: Yes. There are other barriers to access beyond administrative practices that I was touching on here. Perhaps I should have elaborated on the equity one, because I just said we needed to respond to some of the real conditions.

Literacy is an issue. Language capacity is an issue. Familiarity with applying for public service support at all is an issue in some places. We need to work on the methods that respond to those. I know, for example, in the case of a seniors' housing registry in Toronto, it has an outreach dimension which deals, for example, with the media that publish in languages other than English, in the Metro Toronto context. There need to be more and better ways of tackling those impediments to access.

Mr Marchese: I would recommend that we pursue the latter a little more aggressively in terms of outreach. The different media and the different communities are important to use. I presume you are, but if not, we need to do more of it, and I also suggest that a lot of the suggestions you made are very literacy-based still --

Mr Burns: Yes, they are.

Mr Marchese: -- and that a lot of what needs to continue to be done is to reach people in a medium that is not necessarily based on reading. Radio and television to some extent are very useful, but other ways of doing community outreach are important to pursue.

Mr Burns: I think that's a very good point, and it takes you to the community television provisions and the cable world and to public service announcements on radio and other forms of communicating than paper. But you're absolutely right: We're civil servants and we believe in paper-driven communication, and we do have a tendency to start with that.

Mr Marchese: Yes, we do.

I still have time for another question in another area. I think it's been recognized that these are difficult fiscal times, and the recession obviously is evidence of that. We've asked all sectors to do their part in keeping costs down, to find ways to reduce costs and to provide quality service and a quality product at a lower cost. What things have we done or said to the non-profit sector that, "These are the things you need to do to keep your costs down, because you need to play a part in this as well"?

Mr Burns: This touches again on some of the subjects we touched on yesterday and that I touched on in the discussion with Ms Poole earlier on. While at our end we are looking at an aggressive program of refinancing to take advantage of the current market conditions, at the level of the individual operator the costs that can get looked at are utilities, administration, labour, maintenance; I talked yesterday about some of the initiatives we are pursuing on the energy and utility side, I think in response to a question from you. We are also looking at the norms issue, at standard practice, and then looking at exceptions to that and talking to individual operators about their practices and why they might divert from that. I also talked about trying to move from a fixed-budget contract to an incentive-based system; that's to provide a dollar incentive for efficient management at the local level.

Mr Marchese: Are there any examples of that, Dan, moving from a fixed budget to an incentive one? Can you give a sense of what that might mean?

Mr Burns: I think I said yesterday that at the moment we fix a budget relationship -- let's say we fix that we'll transfer $1 million to a particular non-profit or cooperative. If they happen to manage efficiently and end up towards the end of the year looking at a situation where they might need only $900,000, our current arrangement says that if they're $100,000 under they give it all back to us: We've created an incentive for people to look at their situation in the last quarter and spend in order to retain funds we've committed to them.

What I'd like to do is create a situation where if they do manage efficiently and come in under the budget, there's some sharing of the benefit of that, so they can retain some of it -- perhaps they could put some more money in their replacement reserve or invest in a local priority -- and some benefit also returns to the program, either in that year or in the next-year budget arrangements. That's what I meant by an incentive-based system. This is the year in which we are having discussions with non-profits and cooperatives about an incentive-based budgeting system or moving to a more incentive-based system.

In addition to the energy things and the norms I was talking about before, there are other areas worth looking at. Property taxes: I think the auditor mentioned that when you look at the real costs of our non-profits and cooperatives there seems to be quite a wide distribution, and property tax is one of them. We have everybody from people who pay no property tax, because the local municipality has granted them a charitable exemption, up to people who seem to be paying quite a high level. So we're going to, on a more systematic basis, talk to people about that. There are some cases where I think people should be appealing their property tax assessment.

There is a whole series of areas of cost within operating budgets that are worth examining: examining good business practice, encouraging people to look at their costs and to look at alternatives. Some of these are things we can do just at our end. Others are things that really require the operating non-profits and cooperatives to look at their own practices. We've had quite a lot of discussion with the associations that knit together the people who operate in this sector about some of these cost elements, and more to come.

Mr Marchese: You talked about the off-electricity policy which I was very excited by. Of course, that increased the cost to the project, initially at least.

Mr Burns: It increased the capital cost and lowered the operating cost.

Mr Marchese: Right. I also asked what other conservation things we were doing. You talked about moving from electricity to gas and other possible energy forms that would be cheaper.

Mr Burns: We only talked about energy yesterday; we didn't talk about water. Water is another area where significant improvement can be made.

Mr Marchese: If there's time, you might talk about that. But the conversion project only deals with approximately 7,000 units out of our entire 200,000 units. So it provides relief for those who are part of the conversion project, but in terms of immediate relief to other people, the ministry offers nothing else. Is that correct, Mr Burns?

The Vice-Chair (Mr Joseph Cordiano): A quick answer, and then we've run out of time for that round.

Mr Burns: It's a broad question. For part of it the answer is yes, and for part of it the answer is no.

Mr Marchese: Clearly ambivalent.

The Vice-Chair: We have to move on. I had some questions, and the Chair hasn't returned.

Mr Derek Fletcher (Guelph): Ask Mr Callahan if he has any.

Mr Robert V. Callahan (Brampton South): A couple of brief ones, little ones.

The Vice-Chair: I'm going to ask my questions, and then I'll turn it over to Mr Callahan afterwards, if you don't mind.

Mr Callahan: Do you want me to move to the chair?

Mr David Winninger (London South): Yes, move to the chair.

The Vice-Chair: Okay. Do you mind taking over the chair for a minute?

Mr Joseph Cordiano (Lawrence): I wasn't going to ask questions this morning, but I've got three questions in these areas. Can I ask you what your staff turnover situation is like? How much staff is turning over in the ministry?

Mr Burns: Do you want an annual percentage of staff? Is that the kind of measure you're interested in?

Mr Cordiano: Yes, I'm just interested in knowing. First of all, you must keep some sort of data on it.

Mr Burns: Yes, we do.

Mr Cordiano: Just give me whatever you keep.

Mr Burns: For the whole ministry or for the non-profit program specifically?

Mr Cordiano: I'm particularly interested in the non-profit program, if you'd break it down that way.

Mr Burns: Three or four years ago, the ministry as a whole had a 10% turnover. That's dropped to 2%, and that's quite consistent with the general experience of provincial ministries.

Within the non-profit program, the turnover has been higher and continues to be higher than those norms because most of the staffing arrangements that have been made for program delivery -- that is, the development end -- are based on time-limited contract arrangements; most of the program delivery staff are there only for the period of program delivery. A series of Management Board decisions on all of these programs has resulted in them being staffed in that format. So when Homes Now finished, there was a dropoff of staffing at the development end because when we staffed up, we staffed up on a contract basis, not on a permanent basis.

Mr Cordiano: You don't have numbers for me, obviously.

Mr Burns: Not right this minute on that one.

Mr Cordiano: Perhaps you could make those available at some point, a percentage figure.

Mr Burns: I have absolute numbers, but not trends. I'd be happy to provide them if you're interested.

Mr Cordiano: Let's just say that it's significantly higher than the 10% or 15% that you indicated was standard for the ministries.

Mr Burns: It started at 10% and it's dropped to 2%, and the turnover in that program administration was higher than both 10% and 2% in the two time periods I was referring to, yes.

Mr Cordiano: For affordable housing. What I'm trying to say is that the statement that you have a relatively high turnover of staff is fairly accurate, correct?

Mr Burns: Yes, that's an accurate statement.

Mr Cordiano: How many of those people have become consultants? Do you keep track of that?

Mr Burns: No, we don't keep track of it, and I don't have a number or a list.

Mr Cordiano: You can see what I'm getting at. If your staff is turning over and, under the terms and conditions that you have been staffed, you have had mostly contract staff dealing with these projects, they're getting all the necessary expertise and then moving on into the private sector. You've created a whole labour pool of talented individuals who can then consult on that basis. I think there's a point to be made with respect to that.

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Mr Burns: People who have worked for the ministry have gone to a number of other places in the business. Some have gone to municipalities, some have gone to the property management end of this world and some, as you've said, have gone to the development end.

Mr Cordiano: I'm particularly interested in the consulting area, because we have quite a large number of consultants out there who are obviously looking for these types of arrangements. It's an industry that's been spawned by all of this that's going on with affordable housing.

I think it's rather interesting that the staffing methodology used for the ministry is probably seeing a loss of people as they have a place to go. I don't think that really helps you in your efforts to have a good and consistent staffing arrangement so that project management is more viable, which is something we discussed earlier. You simply don't have that pattern or that consistency or continuity of people to be able to determine what is going on with actual projects over a long period of time.

Mr Burns: I think I said in my opening remarks on the first day that the programs we're discussing here today were delivered based on minimum compliance principles. That's what a chain of Management Board decisions over a significant period of time gave the ministry. They were not interested in long-term permanent staff and they were not interested in anything beyond what was required to simply deliver the program.

Mr Cordiano: I have one final question, Mr Chair.

The Acting Chair (Mr Robert V. Callahan): I would just ask the deputy minister in answering -- there's been 15 minutes allocated to each caucus, because I understand a motion to sit later was defeated.

Mr Cordiano: Then I'll pass.

Mr Fletcher: There was no motion, only a point of clarification.

The Acting Chair: I apologize. It's not unanimous consent, I gather.

Ms Poole: Fifteen minutes is fine?

The Acting Chair: I'm not suggesting that you can't ask the question, Mr Cordiano. I'm asking the deputy minister to answer it as briefly as possible.

Mr Burns: I will be as brief as I possibly can.

The Acting Chair: If there needs to be a more detailed follow-up, perhaps --

Mr Burns: I'll follow it up later. I'll do that.

Mr Cordiano: This is a question which you may not have the answer for at your fingertips, so if you'd like to get back to me, that's fine. It's one of those questions that's probably not there in the available data, but it would be interesting to me to find out what percentage of the waiting lists now in existence are made up of people who currently live in Ontario Housing projects. I'm sure you don't have that data.

Mr Burns: No, I don't, but I'm quite familiar with the issue because there was a human rights discussion about the Metro Toronto Housing Authority and Cityhome, when I was at Cityhome, about crossing over in waiting lists. I don't have the answer now, but we'll make a note and give you the best answer we can.

Mr Cordiano: Thank you.

The Acting Chair: Ms Poole.

Ms Poole: Would you tell me when five minutes are up, Mr Chair?

The Acting Chair: I won't, but Mr Cordiano will, I guess.

Ms Poole: This afternoon we're going to be going into a meeting to decide how to deal with the auditor's report and the ministry's response. Quite frankly, while the ministry has given some reasonable explanations in some cases, there still are outstanding issues.

I can understand, when the non-profit program escalated in the late 1980s, why some of these things took place. If we review the scenario at the time, there was virtually a zero vacancy rate; there was an incredible demand for affordable housing; it was a market where people couldn't buy a house in Metro Toronto, it was priced off the scale. I don't know if other members of this committee remember, but I remember when Chaviva Ho_ek said you could buy a house for $150,000 in Toronto and it was plastered all over the Toronto Star, including a picture of this minuscule, tiny, tiny house. I see Anne Beaumont smiling.

Mr Callahan: It was a Greenpark house. "We can make them, but only this big."

Ms Poole: Only this big?

Mr Tilson: Whatever happened to Chaviva? Where'd she go?

Mrs Marland: Chaviva: She was the Liberal minister, right?

Ms Poole: Chaviva was a Liberal minister of whom I am very proud. She did a lot for housing in the area she was in. But I remember the ridicule she got for saying that you could possibly buy a house in Metro for $150,000, and I remember the frenzy we were in at that time to build. We had to build. The private sector wasn't building. Our vacancy rate was nil.

Quite frankly, I think what happened was that there were some unacceptable policy practices at that time, such as not having appropriate conflict-of-interest guidelines in place, including the price that was paid for land, and some of them, at the time you could somewhat understand why it happened, but we're now in the middle -- in the middle; hopefully, near the end -- of a declining economy, a declining market, large vacancy rates.

The ministry has had a lot of time to reassess what has gone wrong, where it's gone wrong and hopefully why it's gone wrong. My fear is that what is I think essentially a good program has certain aspects now that are certainly perceived by the public to be out of control, particularly with the costs associated with the program, so I think it's incumbent on the ministry to provide us with the material that to date we haven't been able to get.

I accept your explanation that some of this material is very difficult to correlate, but I think that if people in this province are to believe that the costs of this program are under control, that accountability is built into the system, that there are controls put in to ensure fiscal responsibility and that the non-profit sector is not costing that much more to build than the private sector, when you take into account extra costs that the non-profit sector must incur, if you can make that case, then I think the people of this province will say, "This is a good program and should continue."

If the ministry and the government cannot make that case, then there's going to be a cry saying, "We don't need non-profit housing; we should go to other alternatives," and I, for one, would hate to see that direction.

I guess what I'm saying to you as a ministry is that I would like you to go back over the coming months and revisit some of the areas we've talked about in these hearings and perhaps make that attempt to show why a non-profit project may cost more and show the people that the reason it might cost more is a reasonable concept.

I think what I'd like to see in our report is to make a list of where I feel the auditor has made recommendations that the ministry has responded to, either that you are doing something now to rectify the problem, or in certain cases, such as with the vacancy rate figures where there really wasn't a problem, just the wrong information was provided to the auditor, and that would be one section.

Then I believe there will be another section where we still have concerns that we cannot prove to the people of Ontario that the accountability is built in, that we can be assured these costs are not out of control, that there is no conflict of interest, and that this program, which I believe is a good program, is running the way it should.

I didn't really need a response, but I did want to put that on the record and ask the ministry to take a look at some of these things and see if you can perhaps provide us with the information we need.

Mr Callahan: I just want to go back so I can be clear on something. When we were talking about the comments on the allocation of units in places like Oshawa, Kitchener, St Catharines and Niagara, which clearly, on the information we have, were allocated to an area that really did not have as great a demand as other areas of this province, I think your answer, Mr Deputy, was that you have revisited that or re-evaluated that as of about eight months ago. Am I correct in that regard?

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Mr Burns: We certainly had a discussion last year with the auditor about it. This is an area which I did not comment on in the ministry letter to the auditor. What we did do much more recently in preparing for this was to go back and look at our own data and discover that the material we had given the auditor was flawed. We then went back to the underlying material, corrected the flaws and recalculated the same kind of indices the auditor used.

Mr Callahan: I'm looking at a letter that was sent --

Mr Burns: This was last weekend.

Mr Callahan: -- by you.

Mr Burns: Yes.

Mr Callahan: It showed, for instance, Oshawa, 1.5 vacancy rate, planned allocations 82, which seem to be rather significant for a vacancy rate of that difference. I just want to know, was your change of policy a direct result of the auditor bringing it to your attention? That's what I'm really interested in.

Mr Burns: Well --

The Chair: Yes or no.

Mr Burns: No.

The Chair: Mrs Marland, 15 minutes.

Mrs Marland: Mr Burns, would you agree that all non-profit housing and co-ops are subsidized, whether market or RGIs, rent-geared-to-income?

Mr Burns: It's so close to 100% that the answer might as well be yes, they all receive subsidy of one form or another.

Mrs Marland: It's not really too tough a question because the mortgages are all subsidized mortgages.

Mr Burns: Certainly, all the ones in the programs we're discussing as a result of the audit, 100%.

Mrs Marland: Okay. How many market value units exist of the units that are in the program today?

Mr Tilson: What percentage?

Mrs Marland: What percentage of the units in the program are market? I don't mind if it's not exact, if you want to ballpark it.

Mr Burns: Of 120,000 in operation today, I'm advised it's in the order of 30% to 35%, so it would mean 35,000 to 38,000, something like that. That's in order of magnitude.

Mrs Marland: Thirty to thirty-five per cent are market value.

Mr Burns: What are called "market rent units," in the program delivery terminology.

Mrs Marland: Right. Are the vacancies that you have existing in non-profit buildings today in the market units?

Mr Burns: Almost all of them are, yes.

Mrs Marland: In order to deal with that, what will you do?

Mr Tilson: Before you leave that, what's the percentage of the vacancies in the market rents?

Mr Burns: I don't know what the universal answer to that is right now; sorry. If you want to, we can see whether we can generate those data.

Mr Tilson: If you could please undertake to give that to the committee, it's important.

Mr Burns: Because we see only a picture of an individual operator once a year when the financial statements --

Mr Tilson: Fine; you could get it from that information.

Mr Burns: It's an indirect look at it.

Mrs Marland: If you want to say, "As of a certain date, this was the percentage of market units that were empty," that's the answer we would need.

Mr Burns: We'll take our best shot at answering that question.

Mrs Marland: Thank you. What do you plan to do about those vacant market units when there are so many other units on the market that are also vacant at the moment? Are you going to have to reduce the rents to attract tenants?

Mr Burns: I touched on this a little bit on day one.

Mrs Marland: Well, you know I wasn't here.

Mr Burns: Yes, I know, but it's in the record of the meetings. It depends a lot on the market conditions you're operating in. in some cases, it simply means that non-profits and co-ops that have been used to having so many people come to the door that they've never had to do any outreach may have to do a bit.

Interjections.

Mrs Marland: Mr Chairman, it's hard for me to hear. There are conversations on all three sides of the table.

The Chair: Mrs Marland's absolutely right. There are too many conversations.

Mr Burns: In some cases, it may simply be that people have to learn a little bit about reaching out to potential tenants. In other cases it may be that what is established as the market rent is now out of line with market conditions because, as you know, in some markets in the province rents have dropped. We aligned the market rents in non-profits and cooperatives to an assessment of market conditions. So in some cases, there's a case for reducing rents, and in some cases we are talking to people about that.

Mrs Marland: Do you think you're going to reach a situation where you're going to have to reduce those rents, which will increase the overall operating costs of your program? When you do that, do you also see where you might just happen to be in a position where your potential tenants would choose rather to rent in a building that isn't a government-owned housing project, so the competition for your market rents becomes more acute?

Your situation in terms of what a market rent should be becomes rather indefensible, I would suggest, with the fact that we've already said that market rent is subsidized. What I'm leading to is my concern that the people who need housing in this province are still on waiting lists. I know what the waiting list is in Peel; it's 10,000 families. I don't know what it is -- maybe you could tell us what the waiting list is -- for the province.

Mr Burns: The Ontario Housing Corp consolidated waiting list province-wide is 59,000 households. That includes the seniors' one in Metro Toronto.

Mrs Marland: But Ontario Housing is combined now with the local regional housing authorities, isn't it?

Mr Burns: In some places.

Mrs Marland: Peel is.

Mr Burns: Peel's ahead of some places in creating common access, something we were talking about before.

Mrs Marland: Would it be your intention to address those waiting lists by doing what you referred to in Hansard, where you said, "We'd like to raise the number of households in poverty in our projects." Is that the direction you're going in, so that families in need -- in other words, the people who are poor, who need housing -- will get that housing, which is already being subsidized by the taxpayers in this province?

Mr Burns: I was going to come exactly to that point because I think, as you see from the material in front of you, I touched on three things: marketing, rent levels and the possibility that in some circumstances it makes sense to raise the number of rent supplement units in a particular non-profit.

Mrs Marland: What circumstances?

Mr Burns: I think you have to look at the mix in the particular project. For example, there are some projects from history that started, in current terms, with relatively low proportions of rent-geared-to-income units. Under the 15.1 program, the norm was 25%, as opposed to 40% deep core now and then some amount of shallow. So there are situations where, quite within the broad context of mix, you can raise the proportion of rent supplements quite logically, but I wouldn't say that necessarily applies in every case.

Mrs Marland: Knowing that all of your units are subsidized and knowing that in the region of Peel alone we have 10,000 people on a waiting list who can't afford any other housing, will it be your intention to allow those vacant market units to become available as rent-geared-to-income units, In other words, using the public tax money to justify the government being in housing, which is your argument -- it's the ministry's argument -- to house the poor, the people who need housing, the people who need accommodation? Will that be your intention?

Mr Burns: There are cases where we have been doing that and there will continue to be cases where we will do that, yes.

Mr Tilson: My riding is no different than a number of other ridings. It's not really a rural riding; it's not really urban; it's sort of urban-rural. But similar questions develop in perhaps the larger municipalities. People complain, first of all, of the long waiting lists. Whether it's seniors, whether it's single mothers, whether it's low-income families, they complain about the long waiting lists. Yesterday, I read you the article from the Hamilton Spectator of December, where it could be 1994 before a vacancy could be offered to low-income families in that particular area.

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The other complaint that I get, and I get it over and over and over, is that there are people who may have initially become qualified as a low-income family and are being placed in these units, and then after a while, for whatever reason, they've got a job, they've got a better job, they've got someone else moving in with them, another common-law spouse who's making more money etc, that those people who are living in those units shouldn't be living there because they are no longer a low-income family. Their circumstances have changed, and there doesn't seem to be a process -- at least that's been drawn to the attention of the people in my riding -- as to how that can be reviewed.

Mr Burns: If you began a tenancy on a rent-geared-to-income basis and your income changes, there is an annual review.

Mr Tilson: I'm sorry?

Mr Burns: An annual review. If your income has risen to the point where you should be charged the market rent established for that project, that's what will happen. But all tenancies of the type that you're describing are covered by the Landlord and Tenant Act and there's simply no basis for forcing people to move out. What would happen is, they'd move from having a rent-geared-to-income tenancy to a market rent tenancy.

Mr Tilson: I'm telling you, sir, that low-income people -- seniors, single mothers, who are on a waiting list for a year to two years -- are having a lot of difficulty with that policy, because they can't get into these low-income units because of that policy. I strongly recommend that you review that policy, because it's obviously totally inadequate. Why do I say that? Because I get complaint after complaint in my constituency office, and I can't believe that every member in this Legislature hasn't had similar complaints. So that policy needs major review.

Mrs Marland: Mr Burns, I'm just going to read you some questions. I'd be quite happy for you to respond in writing to the committee, just to get them on the record since I'm down to my last four and a half minutes.

Would you tell us how many households receive assistance through the shelter subsidy program operated by Comsoc? I realize yesterday you were talking about 54%, but my question is, how many households, not the percentage.

Mr Burns: Yes.

Mrs Marland: And what is the annual cost of the program based on current case loads? How many households will be housed in non-profit housing, at a cost of over $1 billion a year, once all the units are on stream in 1995-96? I think actually you did say 120,000 units by 1995, but my figures make it 136,000, so I thought we should get it correct.

Mr Burns: Today's universe is 120,000. It's actually, I think, more like 170,000, but I'll get you the exact numbers.

Mrs Marland: Thank you. How many households that receive a shelter allowance reside in non-profit housing? That's an important question for us to know. How many households that receive a shelter allowance reside in Ontario Housing Corp housing?

According to the materials you handed out yesterday, there are 264,250 Ontario households that are in core need of assistance with shelter costs. Is this figure for families that are in core need and are not being assisted through any provincial housing program at present?

Mr Burns: Okay, Mrs Marland. I'd be happy to provide the answers to those questions. Should I do that in the same format we were discussing before, addressing it to the Chair and having it distributed?

Mrs Marland: That's great.

Mr Burns: Okay, we will do that.

The Chair: Mr Tilson, I know from the look on your face you have another question, but unless you can do it in 30 seconds and get an answer, we're going to move on.

Mrs Marland: You have a minute, actually.

Mr Tilson: I have a minute, I think, Mr Chairman.

The Chair: I don't think so.

Mr Tilson: This is by the Marland clock.

How do you determine the market rents? How do you determine those?

Mr Burns: It's done through a methodology that looks at market rent conditions in the broader marketplace that surround a particular project.

Mr Tilson: How do you do that? One of the other criticisms that comes in my riding is that you're putting the private landlords out of business because you're in major competition with them, that you're charging less rent than they are.

Mr Burns: I'd be happy to send you the methodology that we use.

Mr Tilson: Thank you. If you could send that to the committee, we'd appreciate that.

Mr Winninger: I should preface my comments by saying that I too have some background in socially assisted housing. In 1988 I was appointed chair of the London and Middlesex Housing Authority, which in fact was a Liberal appointment. At that time we managed, as I recall, over 20 complexes in the London area, representing a housing stock worth tens of millions of dollars with a not-inconsequential annual operating cost.

The same kinds of concerns I hear expressed in this committee room today I think I heard then. When I went to a social housing conference, back in 1988, on quality management in public housing, there was a lot of concern expressed about the accountability of community-based boards for the decisions they were making that affected expenditures of public dollars.

Last night I went and I looked again at the excerpt from the auditor's report and I looked again at the response of the Ministry of Housing and, quite frankly, I don't think the two bodies are that far apart.

Mr Callahan: What were you reading?

Mr Winninger: The auditor acknowledged that the creation of 70,000 assisted housing units in Ontario was a significant and costly enterprise and that there were problems that arose. Some of them were itemized: pressures to meet inflexible annual deadlines set by the federal government; the pressures of the booming real estate market in the late 1980s; and the fact that there was such a pent-up demand for affordable housing that sometimes there was a lack of experienced staff to handle the projects that were coming forward and to meet those allocations.

The auditor isolated the fact that controls might have been less than satisfactory to ensure that projects were built where they were needed and at a competitive cost. There are some points of agreement. There are some points of disagreement.

The auditor alleges in his report that the needs-and-demand studies were not thorough enough and that projects were allocated to areas with high vacancy rates. The ministry takes the position that this was necessary, in some cases, to avoid future shortages by increasing the stock of affordable housing.

Now we find, in some cases, that many of these units which were originally destined to be market rent units are occupied by rent-geared-to-income tenants. This may frustrate, to some extent, integration of the poor and the wealthier. However, I would put it to you that my constituents who are poor and need a home are probably more concerned with a roof over their heads, and their secondary concern would be with being integrated and not ghettoized.

Another allegation put forward by the auditor was that the costs of projects continued to increase after 1989, while land prices and construction costs in fact went down. The ministry takes the position that many sites were approved in 1991 but had been identified much earlier, and because of fluctuations in the market, you didn't always see a decline in project prices which was contemporaneous with fluctuations in the market.

Certainly, I was impressed by the fact that a theoretical construct was used to measure the cost per unit in new complexes which was a theoretical construct and not based on the actual number of units in a complex, and when you actually calculate the actual number of units and divide it into the total context price, the price per unit comes down.

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The ministry is also responding to the concern expressed by the auditor about the highest-and-best-use appraisal values. The ministry takes a position that the best price should always be based on the best market value, and that in fact is consistent with the private market.

The auditor takes a position that there was a satisfactory review by the Ministry of Housing of site plans, that the monthly onsite inspections to ensure projects were built according to plans and the progress payments were justified and carried out appropriately.

The ministry, on the other hand, makes several concessions, I think, which are useful to know. I don't necessarily buy into this notion, but if in fact there is some lack of public confidence that taxpayers' dollars are not being adequately protected in socially assisted housing, it's certainly comforting to know that measures are being taken by the ministry to develop norms and standards for operating costs to ensure that there are operating agreements in cooperative and for-profit housing projects to ensure that appraisals examined recent land transactions and other circumstances that pertain to the site selection.

I am secure in knowing that the Ministry of Housing has found the auditor's report helpful and has begun the process of changing the ways in which programs are delivered and administered, and that some issues raised by the auditor were already identified back in September 1991, which led to a full review. I'm hopeful that in our new Jobs Ontario homes delivery programs a lot of the precepts recommended by the auditor and in fact identified by the ministry will result in a more efficient and cost-effective manner of delivery.

I think that needs to be stated for the record. It may not be in the form of a question, but I know my colleague Noel Duignan has a question to ask, and there is a bit of time remaining.

The Chair: Mr Duignan, we have about seven minutes left, and I know you have other colleagues on the list too. Do you want to use the entire seven minutes?

Mr Duignan: Very briefly, Mr Chairman. I want to look at some of the common myths and misconceptions used by people who are against basically non-profit housing.

Shelter allowances are one of those common myths. Basically, that is wrong. Shelter allowances, I believe, are a short-term way to help people who need housing through an income supplement, not a housing supply program. They help people pay the rent but don't guarantee people affordability or an adequate place to live. Shelter allowances, when we look at it, were introduced back in 1988. At that time, the program was about $500 million. In just four short years that subsidy program has grown to $2.5 billion. That's four times the amount spent on non-profit housing subsidies.

Also, if you look at the rent supplement program, we spent some $80 million this year on the rent supplement program. It doesn't guarantee one unit of housing stock in this province. All we're doing is paying money on rental to landlords, but it does not create one permanent unit of housing in this province. It does not provide affordable, decent places for people to live, and that's what people want.

Also, I believe the common myth was that we have an ideology that we only believe in non-profit housing, but that's not the case. The provincial Liberals, for example, introduced the Homes Now program. The federal Tories believe in the program at the federal level. What is the ILM, the index-linked mortgage program --

Interjections.

The Chair: Order, please. Mr Duignan has the floor.

Mr Duignan: -- or the provincial non-profit program or in fact the 56.1 program?

Interjections.

The Chair: Order, please. Mr Duignan has the floor.

Mr Duignan: I believe there's nothing ideological about supporting non-profit housing. It just makes plain, common, economic sense. It's the only housing that provides decent, affordable homes that will be around for a long time. It's the only housing that helps people with special needs and it's the only housing activity that creates jobs. It's not ideology; it's common sense, which the people of this province want and will continue to want and which we will continue to support. I yield to my colleague Mr Kormos.

The Chair: Mr Kormos, four minutes.

Mr Peter Kormos (Welland-Thorold): I want to ask you some questions, Mr Burns. I want to talk for a few moments about developers and I want to put this in context because so much of what we do here tends to focus on Toronto, and the fact is that the vast majority of Ontario has so little in common with Toronto.

Mr Fletcher: That's right.

Mrs Marland: That's right; I agree.

Mr Kormos: There was some comment made during the course of this week on the role of developers. I've got to tell you, I'm somewhat familiar with and I inquired into the activities of Niagara Peninsula Homes in the Niagara region as developers, and I put this in the context of the concerns expressed about favouritism, fees and value for dollar, along with the request by the auditor that there perhaps be some more standardized needs assessment.

My experience is that Niagara Peninsula Homes, for instance, conducts exhaustive needs requirements before it makes a proposal on behalf of persons who would want to create co-op housing or non-profit housing. Is my impression correct in that regard?

Mr Burns: I haven't personally looked at the Niagara ones, but it's a requirement and has been a requirement all the way along. As we said a couple of days ago, it was suspended in a couple of markets like Toronto for a period of time because the situation had already been assessed generally. It didn't have to be reassessed. But our general view is that organizations like the one you've described do credible local assessments as part of their work.

Mr Kormos: And oft-times hard and fast models like, for instance, fair share allocation models are not in themselves sufficient to determine need.

Mr Burns: That's right.

Mr Kormos: There are some very subjective and local issues that have to be addressed that people like Niagara Peninsula Homes are best equipped to address.

Mr Burns: There are certainly local conditions that need addressing. I don't think I'd characterize them as subjective. There are objective local conditions that don't turn up when you use national methodologies.

Mr Kormos: The problem is that there are some players in the development field who aren't the Niagara Peninsula Homes of Ontario but are far less savoury.

Mr Cordiano: That's a personal opinion.

Mr Kormos: That are far less competent and capable in both assessing need and addressing the needs of their clients.

Mr Burns: There are clearly people who work in non-profit proposals who do better work and others whose work is not so good.

Mr Kormos: I understand that CHAO has an accreditation process for developers.

Mr Burns: In the cooperative world, yes, that's right. There is an accreditation process for people who do development in that particular sector.

Mr Kormos: And that's in effect a means of identifying the developers who are competent, who are qualified, who are ethical.

Mr Burns: There are special dimensions to developing cooperatives. You have to develop a cooperative institution along with the building, and the accreditation processes that have been set up in that sector are intended to address all of that and produce a credible, consistent work at the end.

Mr Kormos: Niagara Peninsula Homes is one of those developers that's accredited and has a good reputation not only in Niagara region and with the ministry but throughout the province. Isn't that correct?

Mr Burns: Yes.

Mr Kormos: Indeed, why would the province operate with non-accredited developers?

Mr Burns: Because the assessment of the ministry is that there are capable project management capacities in municipalities and in private-sector companies, as well as in firms which specialize in the development of cooperative housing.

Mr Kormos: Why wouldn't the Ministry of Housing initiate either policy or preferably legislation that would require non-profit and co-op developers to be accredited ones if they are going to be working with the province and public funds?

What's unfair about that proposition?

Mr Burns: The question of whether we should have a broad accreditation for people who do this particular kind of project management work is one that's been raised a number of times. It was raised by quite a lot of people in the consultation process.

Mr Kormos: Why wouldn't the province urge that there be a regulatory body for developers dealing with the public sector?

Mr Burns: Creating another regulated business is not a simple matter. So I think you have to go to the other side of the question.

Mr Kormos: I understand that, but there are any number of professions that are seeking regulation and the ability to self-regulate.

Mr Burns: That's right, including mine.

Mr Kormos: And if non-profit and co-op developers indeed sought this sort of self-regulatory body, why wouldn't the province facilitate them with legislation?

Mr Burns: That's a question that I can't answer.

Mr Callahan: Point of order.

The Chair: No, there's nothing out of order. I'd like to hear the answer to this question, because time is running out. Is there an answer to Mr Kormos's question?

Mr Burns: That's a question I can't answer.

Mr Kormos: Would that not begin to address --

The Chair: Thank you. Time has expired.

Mr Kormos: -- some of the concerns that were raised about the less scrupulous developments?

The Chair: Mr Kormos, sorry. Time has expired.

Mr Marchese: You must be a lawyer.

The Chair: I want to take this opportunity --

Mr Callahan: On a point of order, Mr Chair.

The Chair: Yes, point of order?

Mr Callahan: The reason I raised the point of order is, that's clearly a policy question that should be directed to your minister, Mr Kormos, not to a civil servant.

Mr Kormos: Mr Callahan, your counsel and guidance is worth exactly what I paid for it.

The Chair: I want to take this opportunity on behalf of the committee to thank Mr Daniel Burns, Deputy Minister of Housing, and all the ministry staff who have joined us over the last three and a half days during this special review of section 3.12 of the annual report of the Provincial Auditor as it deals with non-profit housing. We want to thank you for your cooperation and look forward to the information.

Mrs Marland: You should thank also the staff.

The Chair: I have thanked all the staff, but there are so many private conversations that members can't hear me.

Ms Poole: Maybe we just don't want to hear you, Mr Chair.

The Chair: You can do whatever you like. Anyway, in closing, the public sessions regarding this review are now concluded. We're going to go into private session this afternoon, if you'll just let me finish, Mr Callahan.

Mr Callahan has given me notice of motion that deals with another matter; it doesn't deal with the Ministry of Housing. If you're really interested in staying and listening to Mr Callahan's motion, you're more than welcome. If you have other obligations, we understand.

This session of the public hearings, as I stated, has now been concluded, and I turn the floor over to Mr Callahan.

Mr Callahan: After that vote of confidence, Mr Chairman, I see that people are leaving but, in any event, I'll put it forward because it's one that arose out of our hearings and one that I believe is very important and that I think members would want to follow up. I move that the Provincial Auditor be directed to conduct a special audit pursuant to section 17 of the Audit Act to assess the effectiveness of collection procedures with reference to the quality of information and the timeliness with which it is turned over to the central collection services of the Ministry of Government Services.

Just very quickly the explanation of that: As you may recall, in our hearings we had the central collection people in here, and they told us the biggest problem they have in being able to collect about only 10% of, I think it was, $160 million or $170 million that's owed to this province was the fact that the ministries themselves fail to comply with a 90-day policy that's set down by Management Board of Cabinet in terms of turning those over when they become delinquent. This is a very essential fact, and I think it's something the auditor should investigate. I hope each and every member would support that motion.

The Chair: We'll have time to consider this motion this afternoon or, failing that, we'll consider it when we return in the spring session.

Having concluded this morning's business, we are recessed until 2 pm.

The committee recessed at 1203.