Legislative Assembly of Ontario

ANNUAL REPORT, PROVINCIAL AUDITOR, 1992: MINISTRY OF HOUSING

CONTENTS

Monday 13 September 1993

Annual report, Provincial Auditor, 1992

Ministry of Housing

Daniel Burns, deputy minister

Peter Schafft, acting executive director, housing field operations

Nick But, manager, policy group

STANDING COMMITTEE ON PUBLIC ACCOUNTS

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

*Acting Chairs / Présidents suppléant: Callahan, Robert V. (Brampton South/-Sud L); Murphy, Tim (St

George-St David L)

Vice-Chair / Vice-Présidente: Poole, Dianne (Eglinton L)

Duignan, Noel (Halton North/-Nord ND)

Farnan, Mike (Cambridge ND)

*Frankford, Robert (Scarborough East/-Est ND)

Hayes, Pat (Essex-Kent ND)

Marland, Margaret (Mississauga South/-Sud PC)

*O'Connor, Larry (Durham-York ND)

Perruzza, Anthony (Downsview ND)

*Tilson, David (Dufferin-Peel PC)

*In attendance / présents

Substitutions present/ Membres remplaçants présents:

Carr, Gary (Oakville South/-Sud PC) for Mrs Marland

Harrington, Margaret H. (Niagara Falls ND) for Mr Duignan

White, Drummond (Durham Centre ND) for Mr Farnan

Wiseman, Jim (Durham West/-Ouest ND) for Mr Hayes

Also taking part / Autres participants et participantes:

Peters, Erik, Provincial Auditor

Clerk / Greffier: Decker, Todd

Staff / Personnel: McLellan, Ray, research officer, Legislative Research Service

The committee met at 1405 in room 151.

ANNUAL REPORT, PROVINCIAL AUDITOR, 1992: MINISTRY OF HOUSING

The Acting Chair (Mr Robert V. Callahan): I greet everybody back from their weekend of rain.

Mr Jim Wiseman (Durham West): Maybe it rained on your parade, but not ours.

The Acting Chair: It didn't rain in your area, eh?

We have before us Mr Daniel Burns, the deputy minister, and Mr Peter Schafft, acting executive director of housing operations. On the last occasion we had an opening statement from these gentlemen, so we'll just get right at it.

Mr Daniel Burns: Mr Chair, I was asked some specific questions on Friday to which I have answers, so I can answer now or at some point that's appropriate during the proceedings. I wanted to advise you of that.

The Acting Chair: What's the wish of the committee? Shall we wait till the end or answer them now?

Mr David Tilson (Dufferin-Peel): Mr Chair, I have no problem. The difficulty is how long it's going to take. I think we all have several other questions that have arisen since February. Some of these topics could probably take a morning.

The Acting Chair: Okay. I take it then we do not have unanimous consent to have those questions answered now, so I guess --

Mr Wiseman: I don't think we need unanimous consent.

The Acting Chair: We would, because when last we left there were questions being asked by the members and we're in that stage of the process.

Mr Wiseman: But it seems to me that in presenting the information that Mr Burns would have, he may well expedite the whole process by answering those questions and not having to revisit the territory. So, if we gave him 20 minutes or something to go through his presentation --

The Acting Chair: That's what I was going to suggest, perhaps a maximum of 15 minutes.

Mr Tilson: I don't want to argue too much on this, because we have a lot to cover, but I understood that a lot of this was going to be prepared in writing, and the auditor and members of the committee would have an opportunity to review the responses in writing.

The Acting Chair: Maybe I could ask Mr Burns.

Mr Burns: The questions I intended to answer orally at the beginning will take me less than 10 minutes. Based on the discussion of last time, I have staff here to make presentations on two subjects which were discussed a lot, but that's up to you. I have some written material today and can advise you about the other written material you asked about. That's the status of things from my side.

The Acting Chair: Perhaps we could start with unanimous consent to have you spend 10 minutes to answer the questions that were asked and we'll then leave the other till afterwards. Agreed.

Mr Burns: I was asked if we could provide ministry work plans that cover the subjects that were dealt with in the recommendations of the draft report of the committee, on our audit, and I said that we could. Then I was asked if we could try and do it by this minute, and we have collected a fair amount of material, but to put it in an organized form that you can both find your way through and relate to the recommendations will take a little bit more time. So that was a particular set of materials I was asked for. They're in preparation. I don't have them right this minute.

Secondly, we were asked a number of specific questions related to updates on things we were working on that we had discussed in March, and I have a package of written material covering eight subjects. I think that the titles are self-explanatory and I won't walk through them unless a member of the committee wishes it, only to note that tab 8, "Information on Waiting Lists," which Mr Murphy asked about on Friday, is a summary chart of waiting lists that are in the hands of the Ontario Housing Corp. Now, to get the full answer to Mr Murphy's question, you have to get some other things that we didn't have readily at hand, but that piece is only that part.

My second comment is that we do have written material in relation to a number of other questions we were asked and I'm just filing that with each member of the committee right this minute.

Third, we were asked a couple of questions by Mrs Marland, one on the number of non-profit and cooperative housing providers we fund who have charitable status, and I'm going to ask Mr Schafft to spend two minutes on the answer to that question.

Mr Peter Schafft: One of the things that we cannot provide this committee, unfortunately, at this point in time, is the individual status of the projects which are classified as charitable institutions under the act. It is a very minute number, and what we have to do is actually poll the individual regions to go through that information. We will be doing that and the committee will be provided that information.

Mr Burns: Finally, Mrs Marland asked about the status of a particular project whose proponents had an application in for funding to support a number of developmentally handicapped adults within them. She asked specifically what the status of that funding was and, should the funding not be provided, how the units that would have gone to those folks, if there had been funding, would be allocated, and we have the answer to that question.

Mr Schafft: That made reference specifically to the Robert Cooke co-op. The issue was the 15 units that were being held for supportive housing, basically for a developmentally handicapped group of individuals. There was reference to a date of September 16, and that was a date that had been put forward by the regional office for that particular project. What we needed there was a deadline. Rather than leaving units vacant, what we needed was a time line and a deadline so that in fact the group, including the Ministry of Community and Social Services, knew that we could only go so far and we did not want to keep any vacancies.

We're still going on with discussions with MCSS. We've extended the deadline slightly to the end of September. It's always been the intention, if in fact those units are not filled with supportive housing, that they will be going directly for those in deep core. Those are the neediest group. They are not going to market, and we're talking about 15 units at this point in time.

Mr Burns: Finally, a number of questions were asked on Friday about the method we are using to determine how many units might be appropriate, first in a general part of the province and then secondly at a community level. I have with me Mr Nick But from our policy group, who is responsible for designing much of the material. Should the committee wish it, he's in a position to make a presentation on that or to answer questions if that would be helpful.

Secondly, a number of questions were raised that relate to the design process for the new program, Jobs Ontario Homes, and we have Tita Ang-Angco, who is the manager responsible for the program design work in that area. Again, should the committee members wish some presentation, we're prepared to do that; or if you would prefer to do it on the basis of questions, obviously that's fine as well. That's the end of my remarks.

The Acting Chair: You've done very well. You said 10 minutes and took five. Before we go to questions by members, I'm going to ask the auditor, are there any of these offerings of presentations that would be necessary for your purposes or any questions you'd like to ask?

Mr Erik Peters: Thank you very much for asking. No, I think we had provided you with a list of questions and I understand that is still forthcoming. The other answers were just on specific questions. Thank you.

The Acting Chair: I'm making a list and checking it twice. Mr Tilson.

Mr Tilson: I would like to hear the presentations, but I don't think this afternoon would be appropriate because of time restraints. I think that both of those topics could take some time and I for one would prefer that those topics be held whenever this committee reconvenes in October.

The Acting Chair: All right. I would propose that we do 15 minutes a caucus for the first round; that should take us to 3 o'clock and then we can work from there. Is that agreed? Agreed. We'll start with the official opposition.

Mr Joseph Cordiano (Lawrence): I would like to continue where we left off last week. If anyone recalls, we were talking about waiting lists. Before doing that, I just want to say that obviously we're going to have to take some time to review what you've provided to us today, and in so doing, we will then be able to report to you with respect, I would imagine, to some agreement shared by all members of the committee with respect to the time we'll have you back for further questioning on these items and on the work plans that you've presented for us today. There are a number of things that I would like to get into, but I'm going to leave them till I've had an opportunity to review this material that you've given us.

I'm going to, instead, turn my attention to some questions, as I said, to follow up where I left off on Friday on the whole question surrounding waiting lists. This is something that I think is very pertinent and critical to your method to determine what demand there really is for non-profit housing, in my opinion. The fact of the matter is that if there is duplication among lists, for example, if I didn't recognize an answer on Friday that suggested that you knew how many people are on those current waiting lists who are being housed in Ontario Housing accommodations -- do you have any way of knowing that?

Mr Burns: I think I advised the committee on Friday that for quite a long time, people who were already resident in Ontario Housing Corp weren't permitted to apply to live in another subsidized unit somewhere else in the social housing stock. That rule change has only come in the last two to two and a half years. So there's not a lot of history to that particular part of the waiting list picture.

Mr Cordiano: They're prohibited from doing so.

Mr Burns: Sorry, let me just finish. Secondly, though, to give a specific answer, no, we do not know how many people presently resident in Ontario Housing Corp housing may be on a waiting list for some other social housing provider.

Mr Cordiano: Just to be clear, you're suggesting that they are forbidden for --

Mr Burns: They were.

Mr Cordiano: If they weren't on a list, they were two and a half years ago.

Mr Burns: Up until two and a half years ago. Two and a half years ago, there was a policy change.

Mr Cordiano: That's precisely why I was asking my question, because I couldn't understand how you came to that conclusion. The fact of the matter is that if you don't know that, then obviously these waiting lists cause people some concern as to the number of people who are on those lists who are currently not being housed and seemingly on the streets, if you will. When you hear figures or quotes of waiting lists, it's in the thousands and Metro Toronto, last time I heard -- perhaps you can update me on that. What was the current and existing waiting list for Metro Toronto, if there is such a list that's been compiled by you? I knew there were estimates in the past, but I wanted to get an update as to what the waiting list is currently. Has that been provided in the information?

Mr Burns: Within Metropolitan Toronto, our waiting list in Ontario Housing Corp is in the order of 20,000 households, but as I said earlier in my opening remarks, we weren't able, for this moment in time, to get up-to-date information on the two other major waiting lists in Metropolitan Toronto, which are the Metropolitan Toronto Housing Co Ltd, which is mostly seniors, and the City of Toronto Non-Profit Housing Corp.

Mr Cordiano: Of course, that doesn't include other waiting lists.

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Mr Burns: No, there will other waiting lists at the level of individual projects --

Mr Cordiano: That's right.

Mr Burns: -- all throughout Metro Toronto.

Mr Cordiano: It seems to me that in order to get a real handle on what's going on, not just in Metro but elsewhere, it is very appropriate to make it an issue, for the ministry to get a handle on the actual number of people who are not currently housed anywhere or who are living in what you might consider inadequate housing, and what that really means.

The general picture is that there are many more people who are not being housed adequately, and if they're not being housed adequately in Ontario Housing -- and this is the other issue that I find needs further enlightenment, or at least analysis -- if Ontario Housing is inadequate, then why is it inadequate? Why is MTHA not adequately housing people? That leads us to a whole other area, but it has implications on the demand question for you, because that's been largely the picture that's been put forward, that there is great demand for non-profit housing. And there is, but what that consists of and just what those pressures are lead us into the area of policy, I know, but quite frankly it's an important matter with respect to demand.

Would you like to comment on that?

Mr Burns: Yes. It is obviously a component of trying to assess the housing conditions in the community and whether some more non-profit or cooperative housing makes sense in the community context; that is, looking at waiting lists, which is one of a number of features.

The most significant part, though, I think of the issue that you're raising is not with people who may be in one part of the social housing sector applying to live in another part, but those households that may be on more than one waiting list that are outside the sector and that would also be, in the terms you've laid out, double-counted or counted twice, if you simply took all the waiting lists, added them up and said that was the need. In March, and again on Friday, we did have some discussion about our work to try to create better systems for letting people who might want to apply to live in this sector gain access to it.

One of the collateral consequences of having a more organized access system will be a better knowledge on our part and on the part of providers in the community -- let's say, Hamilton -- about what people have done by way of application. If you had a central place to come to, you might come and say, "I'd really like to live in the west end of Hamilton; I've lived in the west end all my life," and therefore submit an application to the Hamilton housing authority for public housing in the west end, but also to the non-profits that happen to be in that community. Then we would know that this particular household might be on two or three waiting lists. Right now, we don't know that.

Mr Cordiano: This is what's critical, in my opinion. The number of people who would like to live in non-profit housing knows no boundary. There is no limit. If you took the number of people who are currently housed in Ontario Housing and asked them how many wanted to be in non-profit housing, I would venture a guess that it would be quite large. There's nothing wrong with that, perhaps, but I think that causes everyone to question the supply of units on the market that currently exists in Ontario Housing, the pressures that are exerted on that. The fact of the matter is that Ontario Housing stock is being rapidly run down. It's not being maintained, particularly in Metro Toronto. We've heard of numerous problems around that. It's no wonder people want to get out of Ontario Housing. All I seem to see in my constituency office is people who are requesting transfers out of Ontario Housing, from one project to another, because there are problems.

Mr Burns: I think we should make a distinction between those who've applied for transfers within --

Mr Cordiano: Within, yes. I understand that.

Mr Burns: That's quite a large number, and managing that process is a challenge. I do know that when the policy changed, two and a half years ago, the main non-profit operators around the province paid attention for a few months to see if they got a significant influx of new applications from people who are now within the public housing sector. While there were some, there was not a big upsurge.

Mr Cordiano: A few months isn't an appropriate time to measure that, I would say to you.

Mr Burns: I appreciate that -- I don't have data, and I've said that -- but on a judgement call of whether there's a large number of people, let's say, on the Cityhome waiting list who are now resident in MTHA, I don't think that's the case. We will certainly talk to Cityhome as part of giving the full answer to this question --

Mr Cordiano: I disagree with you fundamentally on this.

Mr Burns: -- transfers internally, there's quite a long list.

Mr Cordiano: I just have to emphasize that I do disagree.

The Acting Chair: Could I just remind all members and the people who are in attendance that Hansard can only record one voice at a time. If you're recording two, one of them has been lost to history.

Mr Cordiano: I appreciate that, Mr Chairman, having been in your position.

Mr Wiseman: A voice lost to Hansard; did it ever speak?

Mr Cordiano: It's just that I'm trying to be as specific as I can with respect to the points that I'm making. In an effort to do that, we may cross paths in terms of our questions and answers.

I know Mr Murphy wants to ask some questions, but to finish this round off, I would just simply say that the difficulty I have with all of this is that we are attempting to better understand what the real demand and need is out there. What I would not want to happen, and I think is happening, is that those who really need housing and who are inadequately housed, those who are currently on waiting lists -- and I know there's a priority in listing and a priority rating, but the fact of the matter is that we cannot guarantee ourselves that those who really need a certain type of housing are getting it in the areas that are most in need.

That runs smack right back to the point that we've made and the auditor has made with respect to demand analysis. That's a big concern, because we're allocating resources, and obviously the question of whether we're meeting the demand out there I think is not being answered. Today you have laid before us a plan to do that, and I'm hopeful, but I need to emphasize and reiterate my concerns with regard to that, because I think that's a key and central issue to the entire matter of demand analysis and are the people who are most in need getting the kind of housing that they need, whether it's in non-profit, municipal, private or co-op, including the Ontario Housing units that are available to people. I have to emphasize that I don't believe we have a really good handle on any of this. People are commenting constantly on this question and I don't think get it right, or anywhere near it.

Mr Burns: I'd only say for five seconds that of course waiting lists aren't the way to assess market conditions in a community; they give you only part of a picture. The planning model we use and the material we require from people go well beyond waiting lists. Waiting lists are only a part of the picture.

The Acting Chair: Mr Tilson, does Mr Carr care to share a portion of your 15 minutes?

Mr Gary Carr (Oakville South): No, I think he's got plenty.

The Acting Chair: You're giving him the full 15 minutes, are you?

Mr Tilson: He may jump in from time to time.

The Acting Chair: Just raise your hand when you want to jump in.

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Mr Tilson: I'll proceed before my time is used up. Mr Burns, as you know, our party has been a long-time critic of non-profit housing and continues to be so. In 1991, when I was the Housing critic, I prepared a report for, at that time, 119 Homes Now projects. I have now updated that for a subsequent 320 non-profit housing projects that have been approved and completed by the Ministry of Housing. That's available, I might add. It's a booklet which I'd be pleased to make available to members of the committee or the Provincial Auditor's office. I think you'll find some revealing information.

I'd like you to turn to page 4 of Mr McLellan's paper. This is the subject of the topic of value for money. Are we receiving value for money on non-profit housing? Your response is that you're reviewing guidelines, you're discussing this with the Management Board secretariat. You may have some other thoughts.

In this report that we prepared, we came across a number of rather astounding projects that have been developed. I assume that any I speak to you may or may not know. You may have to ask your staff for assistance. One of them is one that I actually physically went and looked at, and it's one at the Riverdale Housing Action Group in the Beaches. It's on Waverley Road. I have a photograph of it, which I don't know whether you can see from here. I'll eventually let you have a look at it. It consists of four units. There are four units of this development; four families are living in it. It cost $1,274,769 to do all this: $215,000 to buy the place; interest on the land to start construction, $94,187; we paid a consultant over $100,000; the renovation cost over $500,000. This is the astounding part: The cost per unit of this project was $318,692.

This information was received under a freedom of information application which I made and which I got. It was broken down, and that is the information I have received: a $318,692 cost per unit. When you look at this -- I haven't seen the inside of it -- you talk about the NDP when it was talking about rent controls and marble foyers, social housing has gone a long way when you start spending $318,000 per unit on non-profit housing. The taxpayers of Ontario are just shaking their heads in disbelief as to whether this is an example of non-profit housing that's developing in this province.

My question, and I think the issue that's been raised by this committee, is, are we getting value for money for these things? To me, you could get an awful lot of social housing for $318,000 per unit. That's a pile of money. You can pass that to Mr Burns, and other members of the committee may wish to look at it.

Mr Burns, the comment that you made, perhaps not you but your staff, is that it's being reviewed, guidelines are being reviewed, you're discussing this with the Management Board secretariat. If this is an example of non-profit housing for four families at $318,000 per family, that's not value for money. I'd like you to comment on that.

Mr Burns: I am not familiar with this particular project or file, so I don't think it would be helpful if I said anything more about it until I had a chance to look at the file myself. The second part of the question referred to the discussion we had on Friday about appraisals. Appraisals deal with the land component of development, and that was the discussion in the spring, and again on Friday, ensuring that we were using the best possible appraisal methodology as we were dealing with land value within a particular development application.

I said in the spring that the practice we used was consistent with industry practice but that we had an intention to look at our practice, to look at our staff training, to look at our guidelines and that, because the Management Board secretariat real estate services group also are involved in land transactions and doing real estate work, we would be talking to it along the way. I think I said on Friday that we have looked at our practices. We've gotten some outside advice on that. We've taken a look at the advisory material provided to our staff and the kind of training that we give them and are going to revise our internal work in that regard and do some staff training, all of which I think is of administrative value and will produce improvements in program administration. But the question of using highest and best use as a component in doing an appraisal of land, that is industry practice and of course we will continue to do it.

Mr Tilson: Mr Burns, I'd like to return to the Waverley Road project. Assuming the information I have is correct, and I believe it is, because it came from your files, how can something like this happen? How can non-profit housing be created at $318,000 per unit? How is that possible to happen? I appreciate you may not know this specific project. I may list off a number -- which I intend to do, I might add -- and it's unfair of me to ask you to comment on those specific projects. But assuming this information is correct, how can they happen?

Mr Burns: I don't want to offer speculation in response to that particular question. I take it that the history of the particular project is being asked for, and we will provide that. But I don't want to speculate right at this moment.

Mr Tilson: All right, we'll leave that and hopefully you'll be able to review that, because I can assure you that Waverley Road will surface again. At $318,000 per unit it's inexcusable.

I have one other question on the same area. The subject was raised on Friday -- I think Mr Wiseman raised the issue -- about mortgages. There was a project which was in North York called 2 Mascot Place. This is a development of 71 units in which the cost per unit is $96,792. This is a tenants' non-profit redevelopment corporation. This is actually a cooperative, I believe. The question I have with that, when this property was purchased, which was in 1991, the mortgage at that time was $7.951 million. The interest rate was 17%.

Mr Wiseman: A good Tory rate.

Mr Tilson: You can say it's a good Tory rate, but I can't believe the province of Ontario is investing in all kinds of non-profit housing around this province and can't do better than 17%. The mortgage was subsequently, in February 1993, it looks like, renegotiated, because the term of the mortgage was to go until 1997, renegotiated at 9.25%. I also assume that you will not know about this specific project and whether any of your staff will, but I want you to look into it, because this one's not going to go away either.

The issue is, of course, that this was renegotiated for a further year at 9.25%, and yet the mortgage was increased by half a million dollars. Now, I don't know whether there was a half-million-dollar penalty or whether there were renovations that went on. Certainly there were renovations at the outset. I think $30,000 at the outset was spent for renovations. But it sat there for two years.

I don't know whether any member of your staff has anything on that at this specific point in time. I assume that you don't. I hope you will look at that and get back to the committee on that. More importantly, I would like you to tell me a little bit further to Mr Wiseman's question on the whole topic of interest rates. Why couldn't a non-profit housing unit with the backing and guarantee of the provincial government -- and you can't get a better guarantor; at least you couldn't -- only get 17%? Why wouldn't that have been a lot lower?

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Mr Burns: Your speculation that I wouldn't be acquainted with this file is accurate. I don't know the history of this particular project. But again, as I said in relation to the other questions you just asked about the project in the east end of the city of Toronto, we would be happy to look at it and provide you with an assessment.

Mr Wiseman: Which year are you speaking about there, David?

Mr Tilson: How do you monitor these things, Mr Burns? How does the Ministry of Housing monitor what's going on with the renegotiating or refinancing of mortgages?

Mr Burns: We do that through a centralized --

Interjections.

Mr Tilson: There are conversations going on all over the place.

The Acting Chair: Yes. Order, please.

Mr Burns: We organize, if you like, the financing and refinancing through a central facility that gives us the best possible interest rates. We've been doing that for about three years in two different formats. The more recent format was getting us very good interest rates.

So just to answer the general part of your question, we are acquainted with conditions in the mortgage market and we are acquainted obviously with the conditions that attach to the mortgaging of any property that we're supporting. But the history of this particular project and its financing, I'm not acquainted with that, and I will have to look at the file.

Mr Tilson: You will get back to the committee on that?

Mr Burns: Yes.

Mr Tilson: Thank you, because I believe that back then you -- not you but the corporation -- could have gotten as low as 13%, and that's a substantial difference.

I'd also like to know what the half-million dollars is for, whether that was a penalty or further renovations, and if it was renovations, why did it take two years to renovate when you're paying all that annual interest each year?

Are there any other projects that you know of where that has existed, where you've had high interest rates, where there's been renegotiating in the middle of the term? Because most of the mortgages would go on for a minimum of five years.

Mr Burns: For the last nine months or so, we've been running an accelerated refinancing program where we take mortgages that are now -- interest rates considerably higher than the current market and renegotiate them down and out in order to reduce our financing costs. So we are actively engaged in trying to minimize the amount of financing cost that the program is supporting.

Mr Tilson: Again, I know you won't have that now, but can you undertake to provide that information to the committee, as to what sort of refinancing you're doing and what, if any, penalties have been paid?

Mr Burns: We haven't been paying penalties, but our accelerated refinancing program is part of our expenditure control plan and is described in general terms in that, but we can give you a status of that.

Mr Tilson: Well, I can tell you, the mortgagee in this Mascot Place, the CIBC Mortgage Corp, there's no way it's going to reduce a mortgage from 17% to 9.25% and not charge a penalty. I assume there are others like that.

Mr Burns: They may if you also extend the term, and that's the program that we're engaged in.

Mr Tilson: Well, it was extended one year. I'd like to know more --

Mr Burns: Again, we're moving back and forth from the general to the specific. Again, I do not know the facts of this particular file, but I will undertake to answer the questions that you have asked.

The Acting Chair: We are also going to be moving back across the aisle to the government members.

Mr Wiseman: I'll be really quick. I just want to make a quick comment on this line of questioning about the mortgages, and that is that I think it points out the problem with the central bank and the way it's been operating the monetary policy in this country for the last nine years. There was absolutely no need for the increase in interest rates. It started in October 1987 when inflation was under 4%, but they decided to push it anyway.

I think that what this does show is that the banking policy of this country is sorely out of date and does not reflect what is happening in other jurisdictions around the world. For example, in Japan, while our federal Tory and Liberal governments were moving interest rates in 1981 as high as 23% for second mortgages, Japan said that they were going to cap their interest rates at no more than 2.5% to 3%. So there is a differential in borrowing capabilities for their businesses compared to ours of almost 20% and that has had a huge difference in terms of their ability to build infrastructure, and I think it reflects in the huge costs that have been added both in Ontario Hydro and in Ontario in terms of the debt that we've had to carry.

The second thing that I'd like to say is that in other jurisdictions, when the interest rates fall, these jurisdictions have passed federal laws and state laws that allowed the interest rates to be lowered with no penalty. They've also allowed these jurisdictions to maintain that you cannot take a house for bankruptcy, which means that people still have access to homes should their businesses fail, and since a lot of businesses have failed because of the high interest rates and the high dollar, at least there is some protection for them.

So what's interesting about this line of questioning about mortgage rates is it shows that the way our banks, and in particular our central bank, deals with people in businesses is completely out of date, onerous and gives them too much power to put people out of business.

Now, the reason that the rates remain high is because the banks can get a better rate lending to governments than they can in the marketplace lending to businesses, and they also keep the rates high for lending for mortgages. That is one of the reasons that for mortgage money, you cannot get as good a deal as you would have thought in a marketplace, especially if there was some competition.

So that's where I'm coming from on this. When I asked that question last day, it was because I was trying to get at the added cost to the taxpayers of the province of Ontario, not just in housing, but in Hydro and in the debt, what the accumulated impact has been to the taxpayers of Ontario of that very faulty monetary policy of the central government. Now, I know that in 1981 and 1984, it added billions of dollars to the debt of Ontario Hydro, and I think that in terms of what's happening to the rest of the province, this faulty policy of the central government has really created some problems there. That's what I was looking for, and I'm not sure if you want to comment on that right now or whether you --

Mr Tilson: He's not running for office either.

The Acting Chair: You're asking this gentleman to comment on the policy of --

Mr Wiseman: No, I'm asking him to comment on the added costs to the running of this program by the increased interest rate policy of the central government.

Mr Burns: I think I said that.

The Acting Chair: You want to stick-handle your way around that, Mr Burns, without --

Interjections.

The Acting Chair: Just a second. Order. If Mr Burns wants to answer that, but I think we should recognize that any person who comes before us who's in the civil service should not, in fairness, be asked a question of policy. That's a political decision.

Mr Wiseman: No, I'm not asking him a question of policy. I want to run --

The Acting Chair: He can be asked about the administration of that policy and --

Interjection: It's a dollars-and-cents question.

Mr Wiseman: I'm asking for the dollars and cents and how much the interest rate increase from 1987 to 1991 has added to the public debt.

The Acting Chair: You've had it clarified, Mr Burns, if you'd care to answer it.

Mr Burns: I think I said on Friday that I don't hold myself out as an authority on national money policy and I didn't really want to speculate. I have views like any citizen on those things, but that's exactly what those are.

On a specific question like the difference in mortgage rates between our market and the US market, what cost impact would that have if we had mortgage rates like theirs, a question like that we could give an answer to, because that's a question of just doing some financial analysis, but I don't have anything to offer in terms of national monetary policy nor frankly would I know quite how to answer a question like, if we had another monetary policy, what would our mortgage rates have been? There may be people in the industry who could have a way of answering that; I don't.

Mr Wiseman: Maybe I can come at it from another angle. How much money are you saving now by refinancing the interest rates downwards?

Mr Burns: In this year alone --

Interjections.

Mr Wiseman: Then it would tell you how much we should have -- we've paid more.

The Acting Chair: We've asked the witness a question; let's at least have the courtesy to listen to his answer and not interject.

Mr Tim Murphy (St George-St David): We're being discourteous to the questioner.

The Acting Chair: That's fine, but let's listen to the witness who is giving you an answer.

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Mr Burns: In this year, our refinancing program, which I touched on a little bit earlier on, will save us $42 million. Our forecast is it will save us $42 million in expenditures.

Mr Wiseman: What's the average rate that you're getting right now?

Mr Burns: Oh, dear. Again, I think in March we talked a little bit about the advice we'd gotten on the type of financing we'd been using. While we had organized a central borrowing facility, we had been fairly standard at getting five-year terms. The advice we got was to spread our terms a little bit, some shorter, some longer, and balance the kind of refinancing we were doing. So we are getting good rates at all those terms.

We are down in a lot of our borrowing to within a very few points of the federal borrowing rate. We've got a couple where we're under 10 points above their borrowing rate. So for the short term, we've actually had one or two under 5%, and I think for three to five years we've gotten a lot in the 5.9% to 6.1% range. We do this once, twice, three times a month. Each one's a little different, but that gives you the kind of range that we're in, and it's of course well below the performance of a couple of years ago.

Mr Wiseman: Okay. A quick question going in a different direction and then I'll turn it over to my colleague.

The maximum unit price: If I understand the auditor's report, that was determined between the CMHC and Ontario. Is that correct? Have I got that right?

Mr Burns: Yes. From 1986 until now -- we've just changed it, but from then till now, all the jurisdictions involved in program delivery in Canada used one model for capital cost controls called the MUP, the maximum unit price. We've had reservations about it. The type of analysis done in the auditor's report also pointed us in the direction of wanting to take a hard look at it, which we have done. We talked about this in March, and the federal government has been unwilling, and remains unwilling, to abandon its methodology.

Mr Wiseman: That leads me right to my next question.

Mr Burns: We, on the other hand, have changed our practice.

Mr Wiseman: We can unilaterally change ours? We don't have to --

Mr Burns: We've changed it for our own programs. They've refused to let us change it for the programs that we administer that are jointly funded, retaining the traditional system of one capital cost envelope. We have moved to a system where we have divided the capital cost envelope between land and the remaining elements of development cost.

Mr Wiseman: That gives us a significantly different price, then?

Mr Burns: It gives us a much more --

Mr Wiseman: Marketable?

Mr Burns: -- sophisticated way of dealing with cost proposals, and one that we can more easily relate to market conditions than the former model.

Mr Wiseman: Thank you. If we have more time, I'll have more questions.

Ms Margaret H. Harrington (Niagara Falls): I wanted to address two major concerns of the auditor in how we spend money. The first one was actually the maximum unit price which we've just started to discuss. I want to know the purpose -- I think you've already mentioned that -- and the direction that we're going. You've explained that you're going to divide that one envelope into two parts, but I'd like you to explain a bit more about what difference that's going to make in the actual field operations out there.

The second area that I want to get to is the change to our land acquisition process, and that is on page 4.

Maybe I'll give you just a minute or so to try to go a little further with the MUP explanation, as to how it differs from our policies in the past.

Mr Burns: I am going to ask Mr Schafft to give you a bit more detail about how our new system of capital cost controls is designed.

Mr Schafft: Basically, as was just discussed, the former maximum unit price level was established in conjunction with the federal government. However, it was one lump sum, so in fact you had the land component plus all the capital construction costs, plus any what we call soft costs -- which may mean development consultants, architects etc -- which were all grouped into that.

What we found, which certainly was confirmed also by the auditor, was that if in fact you have a low cost on the land side, you might be able to use some of those dollars to do some other work. We also found that without having a separated amount, you can't negotiate as well because you don't have a specific cap.

What we have under the new MUP system is really one where now we know what's going on in the marketplace. We can use the information from the marketplace as far as land. You can establish specific caps as to what the maximum level of land, including some ancillary costs, would be. That's not the maximum; that's really a starting and a guide. The individual groups and the ministry have that flexibility to work within that range -- not the maximum, but within that range -- and you don't go beyond it. What you now have done, then, is separated the other costs, the overall construction costs and all the other costs.

Ms Harrington: Have you got a new name for that, then?

Mr Schafft: Not at this point. We're working on that. It is certainly part of the new JO Homes program. What we're using at the moment for the federal program still is the old MUP system, where also the numbers are down this year as far as the price.

Ms Harrington: Now, besides dividing out the land from the total cost, what changes are there to the amount that would be assigned for the cost of the building? I would think one of the changes is a more regular, every three months or something, update as to what the construction costs are.

Mr Schafft: That's right. That goes back into knowing what's going on in the marketplace; again, the same topic I talked about Friday as far as information-gathering and knowing what's going on in the marketplace. One of the market indicators and information on construction costs -- and I think it was probably also distributed earlier -- is some of the information that comes from Marshall and Swift, which is basically a guide on construction costs and knowing what's going on in the marketplace. All the regions do have access to that, so that is one of the indicators.

Also with the new system, since it's a provincially driven system, we can certainly have much more control over designing it, changing the numbers, more so than previously a MUP system across Canada.

Ms Harrington: In the policy, is there a particular time interval when there will be changes?

Mr Schafft: Normally, it would be set one year in advance, but now the new system will also allow some flexibility if in fact -- because you're not using them as a maximum; you're using them as a negotiating position. So as the market changes, you have that flexibility to negotiate with them.

Ms Harrington: Is that system in place? I know the auditor asked for the time lines and work plans.

Mr Schafft: We're about to have that issued very shortly in conjunction with the Jobs Ontario program.

Ms Harrington: Okay. So it will then be policy as soon as it's announced?

Mr Schafft: For all the new delivery of the new Jobs Ontario program, it will be, yes.

Ms Harrington: The second part of my question was about the land acquisition process. The auditor was concerned, and so was the committee, about the highest-and-best-use policy. I note in your reply that you've said this particular appraisal methodology is not only a ministry policy but a government policy and the minister will be discussing this review with Management Board secretariat. Can you give us any further update as to what the problems are there, and are we going to be able to make changes?

Mr Burns: I think in response to a question Mr Tilson asked earlier, I said that we had looked at our own guidelines. We've gotten some external professional advice on it. We've looked to advising them and to running a training program internally. The use of "highest and best use" as a part of what appraisers do in looking at land value remains part of the system, but we think that we've had a productive review of our business practice and it will result in more even and effective work -- more even in the sense that each staff person will be trained to a practice and a norm and an understanding of the methodology.

However, we're just at the stage of that work where we've finished our internal assessment and we're about to turn to our field side. So at this point, we will be talking to the Ministry of Government Services about their practices and whether our review makes sense in terms of what they're doing.

As Mr Schafft said before, a lot of this work is being done on time lines that will ensure that it's in place for the delivery of the Jobs Ontario Homes program, so that what we put out at the beginning was the allocation model, the evaluation model people would apply. Now we're putting in place the detailed methods we will be using to evaluate individual projects in a physical and financial and developmental sense as we go through those stages in the fall.

The Acting Chair: Thank you, Mr Burns. Thank you, Mrs Harrington.

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Ms Harrington: I just wanted to ask: Does this satisfy the auditor's --

The Acting Chair: I'm sorry. Time has expired --

Ms Harrington: May I ask another question?

The Chair: -- unless you wish to give unanimous consent to Mrs Harrington asking that question.

Mr Murphy: No, in the rotation.

The Acting Chair: I'm sorry, Mrs Harrington. I don't control unanimous consent.

We now will have 20-minute sessions. We'll start with the official opposition.

Mr Murphy: I want to follow up a bit on Mr Cordiano's questions and some of the initial questions on the waiting list issue that I talked about on Friday. Obviously, in terms of using it as a need-and-demand assessment tool, that is, I suppose, to some degree a bit of a blunt instrument, is what we're trying to get at. I'm thinking about, for example, the decline over time of Ontario Housing Corp stock and other publicly -- the stock that's no longer built, in essence, because we've used different tools to build it.

For example, in my riding, Regent Park is I guess not far off from its 40th anniversary in terms of a public housing project. If you were looking at it on one level, you'd say, well, there is a community which has housing, and you wouldn't assess that in terms of need or demand. But I think what Mr Cordiano was getting at, and I was trying to get at it, albeit in a somewhat rough manner, on Friday was how you place the decline, frankly, over time. You go through that stock and there are tenants who are mad. I wouldn't put a rent strike far off the map in terms of possibility because of the level of anger in the community about the quality of the stock, about the housing conditions.

That fits into a more complicated assessment of need and demand, because on one level you take that as housed, but if you start looking, I think, at some of the issues of transfer applications, some of it is obviously larger to smaller, smaller to larger, but I think a growing number, in my sense, coming through my community offices are people who want to transfer to a different setting altogether because they view that different setting as providing perhaps a better alternative.

I think there is a lack of awareness of other things. I'm wondering to what extent your needs analysis builds in the life cycle of that public housing stock. I'm sure it does, and if it does, how do you build that into your needs assessment?

Mr Burns: If you're looking at a community's housing conditions, then obviously the amount of rental housing generally, the amount of rental housing that's in the social housing sector and its size, distribution, vacancy rates, all those things are ingredients into creating some assessment of conditions. Depending on the size of the community and how much analysis is appropriate to the proposition being made, that work would be done by someone looking at housing conditions in a community. Our model talks about looking at those features.

But the other half of what you're suggesting, which is that within the housing owned and operated by the Ontario Housing Corp there may come a day when it has to be replaced or eliminated or that sort of thing, that sort of analysis would not appear at this moment in any market analysis we're doing of a community.

However, there is within the Ontario Housing Corp framework, which is related, obviously, to what the ministry does -- the Ontario Housing Corp is a corporation. One of their priorities is to look at the way they're dealing with their physical asset, if I can put it that way -- many years of investment programs that were essentially annual in nature. The time has come in a number of places to look at whether you should be doing whole-building renewal as opposed to incremental renewal and whether in some cases there is a case for redevelopment, partial or even more broadly.

That policy work and the assessments related to it are things that are going on now within the framework of the Ontario Housing Corp, not within the framework of housing needs assessments that we would be doing, to see whether in a particular community, in Brampton, there's a case, given Brampton's housing market and growth rate, to add some more non-profit housing. We would not be looking at the Peel housing authority's stock in the way that you've raised in the second part of your question.

Mr Murphy: I think of Regent Park, for example, as a special, separate kind of thing, because it is a very large public housing community in a downtown area, built at a time when a certain model of providing public housing was predominant and which no longer is. If I can briefly sidetrack, if there is a community where some of your whole-building renewal ideas would be welcome, let me volunteer Regent Park as one we'd be glad to see you look at. In fact, I know there are people at work at that idea within the community who have had great progress in terms of getting community involvement in redevelopment and who have an idea extant, which I'm sure you're aware of.

Now that I've had my brief plug for that, I want to --

Mr Burns: Perhaps I could just for one second say that we are obviously aware of the Regent Park discussions. The most advanced ones, though, are in Moss Park.

Mr Murphy: Right, yes; it is in fact.

Mr Burns: That's looking at both redevelopment and whole-building renewal together in one place.

Mr Murphy: You've given us some information on waiting lists here, as your tab 8, and I have a summary for MTHA. Am I reading this right, that as of, I assume, the end of July, there were approximately 28,000 people on the waiting list for MTHA stock? I'm just trying to confirm that I'm reading that correctly.

Mr Schafft: The list you have before you, if it's the one that says "Summary for MTHA" --

Mr Murphy: Yes.

Mr Schafft: -- that also does include what we call the seniors' housing registry. You'll see a number, a second grouping down, which is 7,009. That comes from that. In fact, if you subtract, that's the total waiting list for the Metropolitan Toronto Housing Authority. It's about 22,000, in that range.

Mr Murphy: What is not on there then is MTHCL housing.

Mr Schafft: MTHCL and Cityhome, whatever, yes, except for the seniors. The seniors population is --

Mr Murphy: Is all included here.

Mr Burns: This is perhaps a nice point, but all of the public housing in Ontario built and funded under those sections of the National Housing Act, owned and operated by the Ontario Housing Corp, except for roughly 15,000 units of seniors' public housing run by Metropolitan Toronto Housing Co Ltd. The 7,000 that Peter alluded to is related to the public housing run by MTHCL and by MTHA's seniors group. MTHCL has, on top of that, another 5,000 units of non-profit housing which is largely seniors and includes market units as well as deep core and therefore has other waiting lists attached to it than this one. Cityhome, again, with its 8,000 units, has another waiting list situation. It's not as simple.

Mr Murphy: The reason I want to talk about this is because I have some information that the Co-operative Housing Association has kindly provided to me. Their information, I gather, actually comes from CMHC. For example, in the fall of 1992 there was a real variation in the vacancy rate depending on the rent for the unit. Their information is that it's below 1% until you get to $800 a unit and then you start getting the real increases. This fits into an area that Mr Cordiano was going to follow up on.

Thinking back to Regent Park, for example, although I realize it is separate, but using that as the conceptual tool, if you're trying to build a set of units, create new units, in essence, which is what non-profit housing in theory is supposed to do, and you're using market rents -- I know the Provincial Auditor refers to market rent units as part of your demand assessment -- obviously, it's a complicated thing because what you've got is a very low vacancy rate in that portion of the building that is going to be RGI units and perhaps a much higher vacancy rate in the units that make the provincial subsidy lower because those are the market units.

I've talked to some non-profit housing and co-op units about the problems of having that market rent fixed and being unable then to rent because that market unit rent is fixed and they haven't been able to drop it to be competitive with other units in the area. Obviously that has a complicated impact on the subsidy, but their argument is, "It's better for us to get some money at a lower rent than to get no money and have that fixed, higher rent." How is the ministry dealing with that issue?

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Mr Burns: If I could just add one more background ingredient to the quite helpful background that you just outlined, at the time a project opens there is an assessment done to determine what rents are in the marketplace surrounding a project, to determine in relation to that what the low end of market is and therefore what is an appropriate opening rent structure. Projects open each year and they open with rents related to market conditions at that time.

We've had obviously, in some parts of the rental market in the province, a stabilization of private sector rents, or even a decline, and some vacancies, quite a lot of different experiences. Some are just as you described; some are different from that. But in that context we've had a number of non-profits and cooperatives approach us and say, "We have to do something about our rents." In the opening going it met with resistance in the ministry -- I'll be frank -- because, without looking at other issues, it has dollar consequences for our subsidy flow. We wanted to make sure that people weren't taking what might be called the easy way out and just saying: "Gee, I've got a bit of a vacancy problem. Bingo, lowering rents is the only issue." Many non-profit housing providers have never been in a situation where they've had to market units, for example.

A number have also requested that market units be converted to units with shallow or deep rent subsidies to be available to households with lower income. We have accommodated a certain amount of that as well.

We have recently, I think in June or July, issued a bulletin to our regional offices saying that, given the market conditions that were worrying people are persisting in a number of marketplaces, regional offices are free to negotiate some rent changes. But in doing that, they should be working with providers on a number of fronts, not just on, "You ask, we do." Those fronts include looking at the mix in the project -- we have some projects with very low levels of deep subsidy; for example, the ones that were done in the 1970s, something we discussed at length in March -- marketing, to see whether people really have been telling people that the units are available and have been using some form of marketing method; and, third, we do take at least some look at general market conditions.

I think, even up to three months ago, the non-profit housing association and the co-op housing association were not totally satisfied with the ministry's response to these changes. By now they should be seeing a change in our regional offices and have a chance to work through things.

Mr Murphy: I'm going to ask one question and then let Mr Cordiano follow up. Just briefly, there's a reference to the operating costs for units increasing -- especially the provincial subsidy costs increasing -- over time. It could be a billion dollars by 1995. The operating cost issue is dealt with in this recommendation 12. It says here, "According to the ministry, public housing is more expensive than private housing in the areas of administration and maintenance." The question I have is quite specific: Is there a difference in the administration and maintenance costs as between private non-profit, municipal non-profit and cooperative non-profit in the areas of administration and maintenance expenses?

Mr Burns: There is a variation in all three parts of the non-profit housing sector. It varies by size of project, by whether the proponent is large enough to have professional unionized staff, by the nature of the tenants that they're serving, those groups with special needs. There's a difference between those who have new buildings and those who bought old buildings. There are a lot of other variables than the ones you just mentioned.

There's a long-standing argument in this sector about this, with the cooperatives arguing that they have lower administration and maintenance costs than the other two sectors, based on the amount of volunteer time that they have and based on the general proposition that they are less engaged in housing special needs groups as their main purpose. They often have them within the community. They have some support in national studies that this is true, that they are a lower-cost operator. But I think more generally, if you ask people, you'd find it something that people would want to debate.

The absolute dollar amount that we transfer is lowest for cooperatives, but I don't know whether that's because they're the more efficient managers, or because they have a different scale of project and tenant profile, or a mixture of both. I'm not sure there's an objective answer to the question.

Mr Murphy: Okay. I'd better leave some time for Mr Cordiano.

Mr Cordiano: There isn't that much time left. I have a lot of issues to get into. I want to know from the Chairman, what time do you intend to go till?

The Acting Chair: I understand we go till 5 o'clock.

Mr Murphy: We'll have one more round.

The Acting Chair: We'll have one more round of 20 minutes each.

Mr Cordiano: All right, because some of the questions I'm going to ask I'm sure will lead to lengthy answers.

Let me just start with this question, where we left off with RGI and number of buildings. It seems to me --

The Acting Chair: If you run into that problem, or any other member does, perhaps the way to deal with it would be to ask the people, if it's going to be a lengthy answer, to give us a written answer.

Mr Cordiano: No, I don't think that would satisfy my concerns. I would rather have that on the record. Anyway, can I carry on with this question? With regard to the market rent units, I have a great deal of concern, given the policy pronouncements in a document that was released in May, and I guess it's your program overview document, wherein -- let me see here, I just had it here; I'm quoting from the document -- "Non-profit sponsor groups will have to be sure that their selection/recruitment systems are balanced more towards responding to the needs of applicants on the waiting list than to achieving fixed targets."

I'm interpreting that to mean, then -- and it follows with what you're saying -- that the pressures that are there for projects to fill these market units are giving wide latitude to sponsors to fill those market units with rent-geared-to-income tenants. To what extent is that happening? I need to get a better handle on just what that means, because obviously that's going to increase subsidy levels. That was touched on by my colleague earlier. But I would appreciate, more specifically, what is currently under way, what pressures there might exist for the new allocations particularly, because obviously there's a whole new allocation that's coming down the pipe that was just announced. If those buildings are going to be facing these pressures with respect to market rents not being competitive, then what can communities anticipate with regard to entire buildings being subsidized and changing the very nature and concept of the non-profit housing program? That is a very major concern for me and our party.

I must say, just as an endnote -- and I don't know if you'll have enough time to answer this -- it led to our calling for a moratorium. Part of the reasoning was that there was a problem with the way in which the concept of the program would work.

The Acting Chair: I'm afraid there won't be time for that answer, Mr Cordiano. Would you like them to save that for the next round or answer it in writing?

Mr Cordiano: We can save that for the next round.

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Mr Tilson: I know the committee had some discussions about taking a tour of some of the non-profit groups, and I hope that the committee still has that on its agenda to do, because, as I indicated for the last round of questions, I did take the time to look at a number of non-profit housing developments in Toronto. I referred to the first one. I don't have copies for all the committee members but I did mount them on cardboard like I did for the first one, for Waverley Road.

There's a second one, Mr Burns, I'd like you to look at, and I'm sure you have not seen that one too, but I would like to show you this. We can make it available to you. This is a building that's on Pembroke Street, just about five minutes east of here, and it's a corporation that's -- Operation Springboard, actually, is the name of it. The total capital cost for this structure was a little shy of $5 million. There are 60 units, and if you look at it, if the committee were to take a look at this, you would see that they're all very small rooms. They must be. I didn't get inside to see them, but I did walk around the building, and for 60 units -- it is a special-needs building, and the cost per unit is $81,300. Perhaps you can make that available to Mr Burns and the other members.

The question I have, since it was a special-needs project, Mr Burns, what discussions do you have with other ministries when you're talking about putting up non-profit developments such as this, which is for a special-needs building? At least I believe it is. What discussions do you have with other ministries as to whether this is the highest and best value you can get for assisting these people?

Mr Burns: There is an interministerial process for discussing the relationship between -- if I can use simple terms -- bricks and mortar and support to people. If memory serves me, this goes by the felicitous acronym of CARP. Does anybody here want to talk about CARP? Do we have a CARP expert?

Mr Tilson: I guess they caught all they could last weekend.

Mr Cordiano: Another fish story.

Mr Burns: There is a joint process at two levels. One is to relate the general program delivery planning activities of the ministries that are providing support dollars and ours, and the other is at the level of individual projects. It's been running for some years, I think, actually.

Mr Tilson: I'd like in due course for you to tell me a little bit more about it. Perhaps now might not be the time, because I believe we're going to be spending some more time on non-profit housing as the months unfold. But when I look at this, which is for 60 units -- I believe it's a project for men. I don't know whether any member of the government is familiar with this project, and I don't know a great deal about it, other than the fact that it cost $81,300 per unit.

The purchase price was $1.8 million. The interest on land from start to construction was $54,000. The interest during construction was $211,520.

Those facts seem to surface on all the developments, where substantial amounts of money are spent on interest, either during construction or from the time of purchase to the time of construction. In this case, as I say, the interest during the construction was $211,520 and the interest on land to the start of construction was $54,000 -- again, a lot of taxpayers' money that's being spent, and whether this is the best way to do it. Has your ministry every looked at this and the great amount of money that is obviously being spent on interest alone?

Mr Burns: Your observation that there's interest charged during the development process is accurate. That's the case in every project we support. Have we looked at ways of minimizing that, at giving people access to inexpensive construction finance, trying to find ways to have projects move at a faster pace? Yes, we have. Is the development system in this province a quick-moving, inexpensive process to deal with? No, it isn't. So there are some projects that take a while to complete all the stages of development, of planning, construction and the rest of it, and those will have significant interest costs attached to them.

Mr Tilson: Some developments obviously cost a great deal more than others: I mean, the Waverley one that I asked in my first line of questioning of $318,000 down to others which are much lower. Do you have a system to determine how much you're going to spend on a building and how much you're going to spend on construction, considering the amount of people you're going to be serving?

Mr Burns: The programs have always had capital cost controls. I think we talked about them earlier on. The program delivery system in this province and in every province has used the federal-provincial capital cost control system called the MUP, maximum unit price, from the beginning. There are cases where the MUP is exceeded. If the facts of that particular one that you presented are borne out by an assessment, then obviously it exceeds the maximum unit price by a considerable amount.

Mr Tilson: Well, the MUP on the Waverley one is $1,257,456. I guess I just can't get it through my head. When you spend this amount of money, in fairly exclusive areas, for social housing -- we're trying to assist people who are having housing problems, and people are just shaking their heads when we see power of sales and foreclosures going on around this province and then we see units at $318,692 per unit for a Waverley and this last one I just gave you, a room -- one room -- at the Pembroke Street one at $81,300, basically one room. I will admit I have not been in them, but I look at 60 units in a building that size and it can't be much more than one room. If I stand to be corrected in due course, that's fine.

I guess I look at the overall concepts. Do we just take applications as they come in or do we have some sort of system as to, how do we assist people? I'm quite aware of the term "MUP." I'm quite aware of all of that, to be perfectly frank, gobbledegook. I guess I look at the solving of a social problem of housing and determining the rationale for spending that kind of money. Any comment?

Mr Burns: We have systems in place to put a framework around costs. That has developed over time. It's more sophisticated now than it was four years ago and in the next program will be more sophisticated yet. The assessment that we've done in our view demonstrates that the program's delivery costs have tracked market conditions over time, looking at the whole program.

The final part of your question, which I take it is asking about broad choices within housing policy -- why favour one option over another? -- I think is a matter of broad housing policy and I don't think it would be appropriate for me to comment on it in this forum.

Mr Tilson: Sir, I am quite aware of the fact that you're given a particular government policy to follow. That's your job and I understand that. My submission is, particularly when you look at some of these facts, and it's just a few of them that I'm passing around, the system isn't working. The very fact of your admission on Friday as to the way in which you choose whether you're going to go into a particular area is that you determine from the particular applicant, in other words, the developer, as to whether a need is there: It's very easy to establish that. You could look at the waiting lists in particular areas and see they're weighted down. But at the same time, do you think those developers are going to actually look at all of the vacancies? The answer is no, that you need to have a substantial assessment of the housing needs in a specific development, to look at all of the vacancies, not just in non-profit housing but in private enterprise, non-government-run housing. That's the only way it can be done, and I know I'm getting into policy with you, and that's unfair.

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I'd like to change to another topic, Mr Burns. It has to do with the topic that was raised by my Liberal colleagues, and that has to do with the vacancy rate problem. It's being alleged, and I believe accurately so, that the province of Ontario, the Ministry of Housing, is essentially undercutting the private sector with respect to rentals. For example, there is a brand-new Cityhome project which is in the Bathurst-St Clair area, and it is just finished renting up. It's just been completed for rents. The rents for these new, good-sized, all-utilities-included units are less than the average rents quoted in the CMHC's October 1992 rental market survey. I'm going to list the ones for the Cityhome project and then I'm going to list the ones from the survey taken from CMHC, which gets back to my question as to whether you even look at those surveys. I question with how much accuracy you do do that, and I don't mean you personally; I mean the ministry officials.

At 1400 Bathurst Street, which is the Cityhome project, a bachelor apartment costs $415. The CMHC survey for the city of Toronto as of October 1992, which is a year ago, I'll admit, but I don't think a great deal has happened in a year, is $501, which is about $100 difference. A one-bedroom at the non-profit development is $632; a one-bedroom under the CMHC survey for the city of Toronto is $637. It's a little closer. A two-bedroom for Cityhome is $777; for the CMHC survey it's $847.

Obviously, we're looking at subsidies that are being paid for non-profit developments and we're looking at what private enterprise is charging. There is a substantial amount of undercutting. That's been alleged, and that's been alleged in the House and that's been alleged in the media. Having heard those allegations, not only in the media but in the House, can you comment on those allegations as to the undercutting that is going on in this province with respect to non-profit housing and private enterprise rentals?

Mr Burns: I think it's important, in looking at the data that you've presented, to remember the geographic areas they relate to. If I understood the CMHC data you presented, it relates to the city of Toronto as a whole.

Mr Tilson: Yes.

Mr Burns: The city of Toronto as a whole is not one rental market. Yonge and St Clair is radically different from Queen and Dunn, which is different in turn from High Park and Bloor. The opening rents set in a project that we're supporting have to be related to the market they're actually in.

Mr Tilson: Could I interrupt you on that?

Mr Burns: So the market that's relevant is the one in that community.

Mr Tilson: Do you have facts on that that you can make available to the committee?

Mr Burns: What, that the rent structure in the city of Toronto is variable?

Mr Tilson: Yes, as to the variance between area to area and what that variance is. What source do you use to get that?

Mr Burns: We will provide you with everything we've got that breaks down rents within the city of Toronto to whatever level we can get them.

Mr Tilson: How do you get that information?

Mr Burns: CMHC itself, while they publish at one level, actually have data collected at others.

Mr Tilson: So your information would come from CMHC.

Mr Burns: There are other people who survey market data as well, so we will look at --

Mr Tilson: Who are they?

Mr Burns: We have a methodology for looking at rents in a particular district which we use at the opening of a building. So we do it ourselves as well.

Mr Tilson: How do you do that?

Mr Burns: It's based essentially on looking at the market within which a building is operating. It's actually often a matter of some debate between a proponent and the ministry, but you have to choose some comparables that relate to the building itself.

Having said that, the second question about how a building like that relates to the market is to remember this. That building, in my memory, is a little over 100 units, but let's say for the minute that it's 100. Within the Cityhome program, normally 40% of those units are for deep core need households, rent geared to income, households that are in poverty, essentially. Another 40% are offered to people who are eligible for shallow subsidies. So, in the normal course of events, only 20 of those units would be "market" in the sense that we're discussing it. In my view, 20 units in the rental market at Bathurst and St Clair, of the city of Toronto more generally, is an extremely small proportion of that marketplace. It's not just Toronto where this regimen is taking place.

You asked me to say if I felt that our assessment was that -- what our assessment was more broadly, so I think I would argue that in the city of Toronto the number of market units, as opposed to what the rents are on the surface, is pretty modest in relation to the whole supply and has a modest impact on the whole market condition. There are communities in the province where vacancy rates are not clustered just at the top of the market, as Mr Murphy said is true of Toronto, but are more broadly distributed, where there's not a large number of private rental units and where an individual non-profit or a group of non-profits would make a more significant impact on the total amount of rental housing and on market conditions in the sense that we're discussing it. Those are communities where, under our program, someone who proposed to build non-profit housing is subjected to a much more rigorous test of housing needs.

Ms Harrington: I was quite surprised a few minutes ago when I heard Mr Tilson talk about gobbledegook, I think referring to Non-Profit housing and how it operates. I know he represents Dufferin-Peel and certainly Peel non-profit, I thought he would have some appreciation of how they operate, how well they've operated over the past decade or more and what they've done for that area that he represents.

Mr Tilson: I'm saying we can do it a lot cheaper, Margaret; that's all I'm saying. You can do the whole process of in non-profit housing --

Ms Harrington: That's what we're trying to do.

The Acting Chair: Through the Chair, please.

Ms Harrington: I spoke earlier about some of the auditor's concerns. The last topic I addressed was the land acquisition process and I'm wondering, Mr Burns, if you could tell me: Do you feel personally that what you explained to me about what you're doing with the land acquisition process satisfies our auditor?

Mr Burns: Well, I'm not going to speak on behalf of the auditor, and I ask --

Ms Harrington: I'm asking if you are going in that direction to satisfy him.

Mr Burns: I will answer the underlying question, if I can put it that way. We have not spoken to the auditor about that particular methodology. I just asked Peter whether that was the case. We haven't consulted his staff directly. We chose to change it because we think it gives us a much better and much more responsive methodology for dealing with capital costs and for having a cost-effective program. In that sense, we think we're trying to address not just good program delivery objectives, but the kinds of objectives that the auditor suggested in his report should be embedded in our administrative practices. So, from our point of view, we are trying to address that issue, put in our terms and in his; but we have not, as far as I know, sat down and exposed that methodology to his staff nor asked him for a specific comment on it. So I wouldn't want to speculate on their assessment of it until it's done.

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Ms Harrington: I would like to ask the auditor, Mr Chair. Would it be better at the end of our afternoon?

The Acting Chair: If you wish to ask now, it's your time. You can use it in any way, shape or form.

Ms Harrington: I know last Friday I had another question of the auditor as well, but let me just place this one at this time: With what you've heard from Mr Burns about this process, does it go in the direction that you are asking for?

Mr Peters: Just from what I heard, we of course as auditors always have to examine and get together on it, so we'll probably do that. There is one concern that I may raise in this connection, and that is that in the response the committee received in this regard, there was some indication that there would be a review with the Management Board secretariat. There is one brief concern on my part with that, on our part in the Office of the Provincial Auditor, and that is that the Management Board secretariat or the Government Services of course deal with these issues on an expropriation basis. They're dealing with the level of money they would pay to somebody whose property they expropriate for the better public good. I'm not sure yet, I've not reconciled in my own mind, and in our opinion, whether really non-profit housing falls into the category that it really is deemed in the expropriation of land from somebody for a better public use. I don't know whether the choices are there or which way this system ought to be going.

Also, I'm not sure whether that is the indication or the inference that I should take from the comment that this matter will be discussed further with Management Board. But if the indication is that it is a matter of following the same policy as if the land were to be expropriated, then I have some concerns about that.

Ms Harrington: I understand you would have.

Mr Burns: It wasn't our intention to compare our practice to expropriation practice, but to the practice that MGS follows in buying and selling in ordinary market transactions, which it also does. I don't think this is necessarily the forum to talk about expropriation practice and whether appraisal methodologies are the same in all those different realms; it wasn't our intention to create a comparison between our program and expropriation practice but rather with marketplace transactions which MGS is also involved in.

Ms Harrington: Thank you for that clarification. I wanted to get into, I think, an important area for the future, and that is the ongoing operations and what I call management to maintain the quality of the buildings, whether we're talking about non-profit or co-op, over the many years, the 35 years or more. I think management is essential and I'd like to particularly look at, say, the co-op sector. Here we have people who are managing their own units. As a governing body they make the decisions about the maintenance and the cost of their units and what's going to be done on a month-to-month basis, what's going to be replaced. Really, they make decisions on how they get along as a community as well, and I think it's very important that they have that power to be a community and to make those decisions. I think that's the essence of a co-op.

My question is, to get to that point where they can have the expertise to work well together as a co-op, sometimes there needs to be an educational process, a training process. Do you see that as part of operating costs?

Mr Burns: Yes, absolutely.

Ms Harrington: Can you give us a few more details?

Mr Burns: We provide financial support to the training needs of the social housing sector in a number of different ways. First, we provide specific training and development funding to the provincial organizations to develop curriculum and materials and to hold workshops and training sessions of various sorts for directors and for staff people.

Secondly, an ordinary non-profit or cooperative budget would contain within it training and development funding. So people on their own side would make choices about the kind of training and development that the directors and staff should have beyond what may be offered by the provincial associations.

Third, we've been supportive of the development of a number of curricula in the province and other places that are related to non-profit and cooperative housing. There is a community college-based property management curriculum which is used to train a number of people in the non-profit sector. There is an Institute of Housing Management which, while it focuses on management and training within the public housing sector, has some relationship to the non-profit and cooperative sector. I think in the next year or two you'll see more of a relationship between those things.

In addition we have funded, supported, a couple of quite interesting specific training centres. The City of Toronto Non-Profit Housing Corp has a comprehensive training centre, field staff, that's not just technical but includes an exposure to human rights issues and to community relations issues, even for people who are cleaners and superintendents, in order to try to ensure that everybody who deals with the very diverse public that we have out there these days has some appreciation for the issues that are likely to arise.

So we do provide funding now through all those sources and we've had some discussion under way about whether, in the next number of years, we can draw together some of those different threads and through the Institute of Housing Management, the community college system and the internal training programs of the co-op sector and some of the nonprofits we can do something that's even more broadly based than what we now have.

I should perhaps just say briefly as well that the annual conferences of both the industry associations and the social housing sector always contain a large number of training sessions and the provision of educational materials.

Ms Harrington: One other thing I'd like to maybe get your thoughts on -- maybe I shouldn't; maybe this is policy. Last night, I was at a very interesting speakers' event, and David Crombie was one of the speakers, about conserving the environment with regard to tourism, and we had some people from Europe there who are also interested in this. Instead of building housing projects on the green land, the question of intensification and the direction that we as the Ministry of Housing and our own housing projects are -- I shouldn't say that; it's the non-profit housing. Do we have any policy about whether we should intensify land use as opposed to going out to greenfield use?

Mr Tilson: You can put them on Toronto Island.

Mr Burns: I think, if memory serves me, one of the policy objectives of Jobs Ontario Homes, as indicated in the material we've published, is to support proposals to build housing in existing communities, non-existing infrastructure. That's one of the policy goals we're trying to respond to in designing our program delivery.

Mr Murphy: Would you care to volunteer Regent Park?

Ms Harrington: I believe my colleague has a question.

Mr Robert Frankford (Scarborough East): I was struck by the building that Mr Tilson showed, which I don't know anything about, except it says that it's run by Operation Springboard which, if I'm not mistaken, is for discharged offenders.

Mr Burns: Operation Springboard is an agency whose mission is to serve released offenders. That doesn't mean that everyone they house is a released offender, but that's the agency's mission, as I understand it.

Mr Frankford: I'd be interested to know more about this building or other projects they have because one of the questions I hear all the time is around the supposed impact of housing which, whatever the term is -- some of the terms are quite tendentious, "assisted housing" or "social housing," which unfortunately get used as phrases for something undesirable. It would be quite interesting to know about the impact of this particular building. In my riding I often hear concerns about crime, and it would be interesting to know the impact of a building, which actually has ex-offenders, on crime in the area and on the rehabilitation of those offenders.

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Mr Burns: There is significant literature on the community impact of non-profit housing generally and there may be some literature as well on impacts of housing intended to serve particular subclient groups: the elderly or other people at risk or people from backgrounds you just described.

As for this particular project, I don't know that anyone's looked at its community impact, to be honest. I think it may be Mr Murphy's constituency, but you've asked the question and we'll check and see if we have some material on that.

Mr Frankford: I think from my point of view in Scarborough East, anything that would lead to better-informed discussion about the whole topic will be very helpful. One does hear very frequently very simplistic arguments about the impact of housing, which is often called social housing as though it were in itself a problem instead of being a solution.

Mr Burns: At one point in my professional career I was the director of neighbourhood planning in the city of Toronto, and when discussion was going on in a community about the proposed introduction of a new project and those kind of questions arose, one of the things we often did was put folks on a bus, take them to a few and when we went and looked at the places, we let them go and knock on the neighbours' doors without anybody else there, no city staff, no proponent staff, and just ask. Out of that kind of experience came, I think, a much more focused discussion about the impact of projects as opposed to one just based rather on apprehension. So I think there are ways of getting people to have some appreciation for what projects like this will or will not be and what kind of issues really deserve focus.

Mr Frankford: I'd be very happy if this committee took a tour of Mr Murphy's riding and my riding, wherever. I think we could learn a great deal about the types of housing that we're talking about and its impact on real needs in our ridings.

Mr Wiseman: I'd like to begin by taking a look at the costs that are being built into some of these projects. Have you done any studies or do you know of what it costs, what has been added by municipalities for site plan approval, site plan grading and facades and landscaping? Do you have any idea if it's more for affordable housing and less for the private sector? Do we know any of this?

Mr Burns: I don't think there's any one answer to that because the variance in municipal practice when it comes to development standards is significant. I think the only evidence anyone's got about this stuff is fairly anecdotal.

Mr Wiseman: Okay. When I noticed the cards going around from Mr Tilson, there is the section of fees. How much control do you have over these fees? For example, I understand that architectural fees are on the basis of a percentage of the total construction costs. Is there any way of getting around that, or how can we bring those fees and application prices down?

Mr Burns: On the professionals directly related to the building, if I can put it that way, the architects and the engineer, if it's a multistorey building, the professional engineers' association and the Ontario Association of Architects have standard fee schedules, but for some time nobody building our projects paid those things. We've essentially moved to a fee-for-service system. It's not a fixed rate related to the size of the building, which has tended to be the way they preferred to have their fees arranged.

On the side of development consultants or development coordinators, we had a long discussion on this in March and I indicated that while historically, federally and provincially all over the country, a guideline of 2% had been used, much the same as there used to be a percentage guideline for architects, we've moved away from that towards a fee-for-service basis. The average had dropped in that one, just to give it as an example, from around 2% of the capital cost to around 1.5% as a result of moving to a fee for specific services as opposed to a fee related to capital cost. Architects and engineers have had the same experience in our program; that is, their fees have dropped.

Mr Wiseman: On page 3 of the information that you gave us today, tab 1, you've indicated here: "Municipalities where there was a high vacancy rate in the private market were put on a restricted list and were not allowed to apply for units even if there is a need for RGI units. The new distribution model takes into consideration the demand for market units in the total allocation of non-profit housing throughout the province."

In every community there are some families that cannot afford even the lowest rent that is created by the market situation. Have I read this correctly or do you have some other mechanism that would allow for those kinds of families to find accommodation within that area, even though its vacancy rates may be high enough not to allow it to have that?

Mr Burns: I think, if you'll remember the discussion in March, in the December proposal call we actually refused to entertain any application from a number of municipalities where private sector vacancy rates were high, as revealed by the CMHC data. We didn't look any further into that, to look, for example, at the kind of issue Mr Murphy raised about whether that was concentrated at the top end or the bottom.

What this paragraph says is that that kind of blanket ban has been removed and replaced by a requirement that you be clear about local market conditions. So you could imagine a community where vacancy rates for units above $1,000 a month might be 10%, but below it, it might be 2% and below $800 it might be next to nothing. That's a more subtle assessment of local market conditions.

We could also imagine a community where there might be high vacancy rates across all sectors -- size, price ranges. There may still be room in that community, for example, for a special needs project with these subsidies for a particular component of the community, even with those broader market conditions. What we've done is simply said if you want to make a case like that, there is room to make it, whereas back in December we didn't take applications from Windsor or Kitchener and a number of other communities at all.

Mr Wiseman: Can we turn now to tab 4, "Work Plan -- Cooperative Project Operating Agreements"? In paragraph 6 it says: "The fall of 1991 brought two major exercises which are closely linked to the operating agreement: the consultation on A Housing Framework for Ontario and the non-profit program review. In its response to the framework paper, CHAO sought greater autonomy for the co-op sector, while through the NP review, treasury board asked the ministry to look for ways of increasing fiscal control and decreasing expenditures. The goals of the two exercises seemed to be at odds with the operating agreement as the means to one end or the other."

The next line is, "The agreement is finalized and individual operating agreements are being signed."

A criticism that I have heard of this is that by creating this agreement we may be hamstringing some of the cooperative movements from being able to find savings and have that money invested in their own way. Maybe you could give the committee some idea of what's in these agreements and whether or not this criticism that I have just brought forward is in fact accurate.

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Mr Burns: I think there are three different parts of this that are worth touching on. First, it was the negotiating position of the co-op housing movement for the term of a particular part of the operating agreement -- five years, some term like that -- that their financial arrangement with the province should be fixed and not subject to change on our side. It's our view that budgetary decisions are made annually, and we had to have some residual ability to reflect our real fiscal situation in our financial relationship with them. That's really what that paragraph alludes to: two different perspectives.

In the end, what the agreement says is: In ordinary times there will be a stable, predictable relationship, but in extraordinary times, the province has the right to reflect its real fiscal situation in the budget relationship. So in effect it was a compromise, put it that way.

Now, because of the fiscal situation this year and last year, we've created some significant restrictions and reductions in the transfer payments we make -- I shouldn't use "transfer payment" because that raises a whole other host of questions. The money we spend to support non-profit and co-op housing, we've made significant reductions in it. That has reduced the budgetary flexibility of non-profit and co-op housing operators, there's no question about that, and therefore it's reduced their capacity to make choices themselves. So yes, you do hear them arguing that we've done that, and it's not an argument, it's a fact; we have.

However, we're in the middle of a process of change; we're not finished. We talked a little bit about changing the design and management of what are called the replacement reserve funds on Friday. We've also been talking about trying to change the operating budget relationship so that it does create some incentive for individual housing providers to find savings.

To be frank, at the moment the incentive -- and this has been true from the beginning of the program; the same thing is true in public housing -- is to spend to your authorized budget relationship, whatever that is, because if you spend under it, you're supposed to give 100% back to the ministry, and if you spend over it, you have 100% unfunded deficit. Certainly, when I was in that business, that's what we tried to do: spend all the allocation we had.

In a world where seeking systematic savings is fundamentally important, we ought to be moving towards a budget relationship that has incentives built into it, so that if you do productively find savings locally, at least in part it can go to local priorities. We haven't done that yet, worked through how that might happen, so you will hear in individual communities from non-profit and cooperative housing providers that they're feeling a little hard done by in their financial relationship with us. Yes, we've been tough on them, but we're not finished the process of change. I think at the end of it we will see emerge a situation where if they do find local savings, they'll be able to retain at least a portion of that for their own priorities.

Mr Wiseman: Have we run out of time?

The Acting Chair: Yes, you have.

Mr Tilson: You shouldn't have asked.

Mr Wiseman: I like to be fair.

The Acting Chair: I don't know whether committee members want some time at the end of the day to talk about instructions we might give our research officer and how we're going to deal with this or whether you want to do that on another day. If we go another 20-minute round for each of the caucuses, we won't have time to do that.

Mr Cordiano: Mr Chairman, if I may, the clerk's not here, but do you have a schedule of the rest of the week before you, because we do have an additional period of time for us to discuss those matters. I think it was prearranged.

The Acting Chair: I'm told we do.

Mr Cordiano: Yes, okay, it was Thursday that we --

The Acting Chair: Wednesday or Thursday.

Mr Cordiano: So that is the time that we would have for that.

The Acting Chair: Is it agreed that we'll continue the rotation, 20 minutes for each caucus?

Ms Harrington: I understood that once we were getting towards the end of today when we finished questioning the ministry folks it would be presumably the time to look at the draft report and make our decision as a committee on the report.

The Acting Chair: We have some time on Wednesday at 2 o'clock. We'll be in closed session; we could discuss it at that time. I presume the reason all the caucuses would like to use the balance of the afternoon to ask questions is that we will not have these gentlemen back again and we want to use it to the fullest.

Mr Tilson: Quite the contrary, Mr Chair. I hope we will have these gentlemen back.

The Acting Chair: We will, but not during this week, in any event. So do we have general consensus that we continue the questioning? Unanimous consent?

Ms Harrington: I would have thought that this committee has other work to do for the balance of the week and that we should be looking at this report today.

Mr Cordiano: If I may, Mr Chairman, because I'm in this awkward position, in our subcommittee we had scheduled the time on Wednesday to do just that and to order our work for the future. It was built into the plan that we would do that, and today was left for questions entirely.

The Acting Chair: I will inquire once more: Do we have unanimous consent to continue with the rotation?

Mr Tilson: I don't think we need unanimous consent. This committee passed a resolution that this is the procedure we would follow, as Mr Cordiano has indicated.

The Acting Chair: Fine. Then we'll proceed. We're cutting back on the time that each caucus will have now if we're going to end at 5. We will each have 17 minutes a caucus. The official opposition will start.

Mr Cordiano: Thank you, Mr Chairman. Just to carry on, I think at the last round, an hour ago or so, I had started a question that dealt with the whole question of market rent units. The policy has now changed, as you pointed out earlier. I was trying to get at just how far this policy change would go and specifically if there was a consistent policy that would be followed or you're doing it on an ad hoc basis, project by project, and how that fits into the overall game plan of the ministry, if you will, in determining what subsidy levels there might be, increases in the subsidies, and if you had provision for that.

Mr Burns: There are three different remarks I should make in response to the question that you asked some time ago. The first has to do with looking at existing cooperatives and non-profits. We talked a little bit about this in March, so I'll be brief. Of ones built in the 1970s, a lot of them have only 25% rent-geared-to-income and 75% market. More recently, 40:40:20, which I described earlier, would be a typical model; 50:50: 50 deep, 50 shallow; one third, one third, one third -- you see models like that.

Mr Cordiano: If I may, the minister has announced a new policy with regard to the new allocations. Is that not correct?

Mr Burns: I'll come to the specific question you asked about the guidelines in just a minute.

Mr Cordiano: Okay.

Mr Burns: Five or six years ago the government of the day -- and it continued on till recently -- set aside funds to allow existing cooperatives and non-profits to raise the amount of rent-geared-to-income housing we had in a particular project. In the case of a Cityhome project done in 1976, you might be able to raise it from 25 to 35 by using that supplementary funding. That's the kind of supplementary funding we've made available to a number of people who've run into vacancy trouble, where raising the RGI component doesn't turn it into 100% RGI but raises it from what historically might have been a relatively low level. That's the first theme.

Secondly, the Jobs Ontario Homes program does contemplate, in the whole program, market units, shallow and deep, but as Homes Now did, it would allow an individual proponent to apply for 100% deep core in a particular case, or those other models that I alluded to. That hasn't changed. But up until Homes Now, your plan for distributing the type of units you had, your targeting plan, was a fairly rigid requirement, to the point where you even had to tie it to units. Sometimes you'd have to actually exchange letters with our regional office if you wanted to change it around. That sometimes created problems at the point of entry, where some poor household would be standing at the door and the non-profit would be saying to them: "I can't let you into that unit. Our targeting plan would be bent out of shape by one unit." The applicant wouldn't know that the proponent could write to our office and get a little trading around; it's all at the margin.

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What we've now instructed people to do in this exercise is not to behave rigidly. We will be able to accommodate at the margins. That's different from saying we're moving to a 100% RGI program; we are not. But we are saying that the targeting plan and the relationship there, which by practice was a little bit flexible -- but you had to write back and forth -- should become practice at the point of entry as well and a household not be denied out of small margins and budget arrangements.

Mr Cordiano: Just to add to that, I guess, then, it would follow that you're allowing for adjustments to be made with the market units. You commented on this earlier. To what extent that would unfold is obviously going to be a function of the marketplace and just how much demand there is for those market units.

Mr Burns: Yes.

Mr Cordiano: This is all informal; of course, we don't have the ability to collect data as you might have. But again there seems to be a problem with those market units, and the adjustment that you're going to have to make downward in terms of the price structure obviously affects your subsidy levels. How far are you adjusting those, and what do you foresee for new allocations, the new allocations being forecasted or the new allocations that have been actually decided on?

Mr Burns: Yes, they are lower. By how much? It varies by market. Just to go back to the case of Cityhome, which I happen to know reasonably well, between 1974, the creation of Cityhome, and now, Cityhome has been through two previous periods when it had significant market vacancies, when it had to mount a marketing program to deal with the issues that we've just been discussing. As their problem built up, they revived what they had abandoned, what they didn't need in the late 1980s, which was the capacity to market. They don't just do that by advertising. They actually have been phoning through waiting lists and doing a whole lot of outreach types of things.

They had also talked to us about rents in some markets, and they've also talked to us about rent supplement, if you want to use that term, or raising the number of RGI in some of their oldest projects where the proportion is low. Their strategy is based on a number of different pieces. They're a big organization; a small one might only have to use one or two bits. I don't have a single number to tell you to confirm those.

Mr Cordiano: No, I'm not looking for that. I'm looking for a policy which you've determined would be one that allows for flexibility to adjust to the marketplace. Am I to understand, then, that if Cityhome applied for adjustments in rent levels for those market units, you would accommodate it?

Mr Burns: We wouldn't necessarily accommodate them, but we would certainly have a discussion about it, because we still have the other problem, which is that the incentive kind of runs in the direction of their getting their rents down as far as possible because money is on our side. We want to make this a real adjustment, not just administrative convenience, real in the sense that it's got a relationship to market conditions.

Mr Cordiano: Am I to understand, then, that you would try to maintain that market component --

Mr Burns: Yes.

Mr Cordiano: -- but you wouldn't necessarily allow for rent adjustments downward? What is it exactly you're trying to tell me? I'm trying to get a sense of it.

Mr Burns: You said they could apply and we would accommodate them; I said they could apply and we might accommodate them. They've got to make their case.

Mr Cordiano: You would look at it on a case-by-case basis.

Mr Burns: Yes, that's what we're doing.

Mr Cordiano: So there's no set policy, in other words, for determining at a certain level of market --

Mr Burns: There are the things that you have to look at, the elements of judgement, but there's not a sort of rule, like everyone can have 5% off. You have to look at these issues.

Mr Cordiano: I understand that. But if I were observing this and trying to review what you have done in determining that, then I would have a difficult time trying to come up with conclusions that were consistent. The best you could offer me is that this would be done on a case-by-case basis.

Mr Burns: As it is in setting the opening rents in a project. We have a methodology that every case has its own outcome. We just had Mr Tilson describe one of them.

Mr Cordiano: That's fine. I can appreciate that market conditions vary right across the city, as a matter of fact.

Mr Burns: We have to be consistent in our methodology, but the outcome has to be related to the market conditions.

Mr Cordiano: Yes, and that's what I'm trying to get at, the methodology. I'm trying to say if you have a consistent way of approaching that, then it would be understandable as to how you adjust that, given the market conditions that exist at the time in the particular segment of that market.

Mr Burns: If it would be helpful, I think we could give you our guidelines of field staff.

Mr Cordiano: That would be helpful.

I'm not going to go into some of the areas that you've touched on here, but they're very pertinent. I'm going to leave those. We wanted to talk about operating budgets and how many were approved, how many were still outstanding, but we're going to come back to all those issues, so some of the issues we're talking about today are some of the unanswered questions that I had on an ongoing basis with a non-profit program.

I want to turn my attention to the whole question of the allocations for this year, the announcement that was made several months ago with the new allocations. I believe it was 5,000. I don't have the program announcement right in front of me, but you know what I'm referring to.

Mr Burns: We issued a call for proposals under the Jobs Ontario Homes program around June 1 for a universe of 5,000 units province-wide.

Mr Cordiano: Yes. How many of those allocations have been taken up so far? Have you got any indication of that or is there an assessment of that?

Mr Burns: This particular evaluation process differs from the ones we've had in the past in that it has two stages. In the first stage we evaluate the group, organization, institution, company that proposes to develop a non-profit or co-op housing. If they survive that review, we will then look at their specific project afterwards. In other words, we've taken those things apart. We're funding sponsoring groups, not individual development sites.

It was the subject of some speculation whether we would get a whole lot of submissions from sponsoring groups or whether we wouldn't. We got a whole lot. We got submissions from 550 organizations wishing to sponsor non-profit or cooperative housing. We're evaluating them. We're trying to create a situation where we only let those groups we have confidence in as sponsoring organizations through to the level where we're evaluating their specific developments.

Mr Cordiano: You've gone through the evaluation process?

Mr Burns: The process of evaluating the individual sponsoring group submissions is almost over. It may be over in some parts of the province outside of central Ontario. At that point, we will be looking at the specific development proposals of the groups that are successful as proponents. Some of those may be connected to development proposals that are in very good shape and ready to go; others may not. It may take some time. At that stage, decisions will be related to the real conditions that surround the group.

Mr Cordiano: Will the new model for demand analysis that you're utilizing be applied to this allocation?

Mr Burns: Yes, it's being applied now. One of the things that you have to do to convince us that you're an adequate sponsoring group is demonstrate that you've got a need within your market. It's part of what you have to do to respond to the big grey book that we gave you. Our evaluation criteria are one of the things in the big package you got today.

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Mr Cordiano: Yes. I realize that. I'm not going into that in any detail.

Mr Burns: If you have groups in your own community who've put themselves forward, we're evaluating them as sponsoring groups and the case that they have made in that particular community, just to use your own community as an example.

Mr Cordiano: So your demand analysis would be based on their ability to demonstrate that there is a demand for their units in their particular region or local municipality or whatever.

Mr Burns: They have to make the case. We, of course, are not completely ignorant of conditions in communities. We have our own data and we have, of course, CMHC's data, which is part of what needs to be brought to bear.

Mr Cordiano: Okay. How much time is left?

The Acting Chair (Mr Tim Murphy): You have three minutes.

Mr Cordiano: There's one final question that I have with regard to the project or a sponsor determining a potential tenant's rent-geared-to-income or RGI level. It is the sponsor who verifies the information, fills out the application and then verifies the information to determine what the proper level of subsidy is. What happens after that to ensure yourselves that the sponsor has followed the appropriate steps in determining that in fact this person qualifies for that RGI?

Mr Burns: Every operating non-profit or cooperative must have an auditor and be audited annually and submit the auditor's report to us. In addition, we do program-based audits of a cross-section of cooperatives and non-profits every year, which includes looking at compliance with all these things, including income verification.

Mr Cordiano: Okay. I would be interested in knowing how often that's done and what kind of information. I would like to know how detailed that is and how often that happens.

Mr Burns: That's one of the questions that was asked on Friday which we were to give you with our work plans stuff. We actually have a big internal audit program and standards and things that we do. Our director of internal audit is here, if you'd like to explore that.

Mr Cordiano: I'm sorry, then I'm repeating what was there. Okay, that's fine. I'm interested in that as well. Thank you.

Mr Carr: I was just looking through Mr Tilson's binder here, and it's very interesting. Just so you know what it does is, it shows all the consultants, all the lawyers, what their totals were, what their percentages were, who the principals are. It's very interesting. I won't embarrass any of the consultants, but the 1 Waverley Road, on cost on a per-unit basis, they range everywhere from -- well, let's do it percentage-wise -- 8% to 2%. You've now said you've gone to a fee-for-service. How much is that going to save the province by going to the fee-for-service?

Mr Burns: I can't answer the question now because I'd have to make estimates of the global capital amount, but if I take it that you've asked the question, we'll respond in writing, given some assumptions about capital costs. It's quite a large sum of money.

Mr Carr: As you look at it, there seems to be a lot of profit in non-profit when you get into the consultants. Do you know the consultant at Waverley Road?

Mr Burns: I don't know. As I said to Mr Tilson, I'm not acquainted with the file.

Mr Carr: So you don't know why it would be so high.

Mr Burns: No. As I said, I'm not acquainted with the file but I undertook to assess it.

Mr Carr: When you look at it, you see that the same consultants appear to have some of the highest costs. Again, the swings would be, if you're talking 2% to 8% in total dollars, a substantial amount for the province. Just so I get this straight, there aren't any plans to control the consultants' costs then?

Mr Burns: No. I think we discussed this at some length in March. We changed our practice, it must be close to two years ago, in the field in terms of what we would accept by way of a submission. We've moved away from a standard guideline to a fee-for-service package and evaluate those things. We are going to use that kind of approach in the new program, not a standard guideline, but you have to be providing fees related to real services provided.

Mr Carr: So Waverley Road, which worked out to be 8% looking at it here, can't happen again then.

Mr Burns: Is the 8% inclusive of the architects and engineers?

Mr Carr: No, they're broken down.

Mr Burns: Just development coordination?

Mr Carr: Yes. They're broken down, architects and consultants. That's why it's high and it ranges. When you're talking the total cost of that project, you're talking a substantial amount. It would appear to me, just so you know, these consultants are all listed, as well as the principals. It seems to be the same people who are charging.

I assume now that these people -- we're talking about the past -- made a lot of money, but I want to make sure that we've turned off the tap, as it were. You're saying we have?

Mr Burns: Yes. To use the metaphor you're using, we have switched from one kind of tap to another. Instead of opening it and having it just pour out, it now has a nozzle and comes out in little pieces.

Mr Carr: How much water, and in this case money, do you --

Mr Burns: There's less water. This is a water-efficient program delivery system.

Mr Carr: Unfortunately, it wasn't, and the water wasn't water; it was money. Looking at the savings that Management Board is asking you to do, as deputy, you must be able to tell me what the saving is going to be. How much are we going to save and how much percentage-wise? You surely must know that. If you've turned off the tap, you must know how much you're telling the government you're going to save. How much did we waste, in other words, by not doing this a long time ago?

Mr Burns: I've told you that over the last two years, across the system it has been reduced from around 2% to around 1.5%. Individually, there will still be a spread, because people have different conditions they have to meet, different real services they have to provide. At that level, that is the answer. Now, how much that would be in dollar terms in the global amount of a particular program, that is a question we can answer; I just can't answer it right this minute.

Mr Carr: But it would be a substantial amount.

Mr Burns: It would be a substantial amount of money.

Mr Carr: I know Mr Tilson wants to take over. The Ataratiri project: What's the bottom line that will cost the province? Are you aware now?

Mr Burns: No. I don't think I could give a total bottom line, partly because there are still some outstanding settlements and partly because it would require us to forecast what would happen in terms of future options; in other words, a revenue side.

Mr Carr: If in fact you can ever get rid of it, which you probably won't, right?

Mr Burns: That's not perfectly clear to me at the moment.

Mr Carr: But it would be fair to say that it's cost the province and Toronto. I guess there are some legal battles back and forth, but we're talking about hundreds and hundreds of millions of dollars for the bottom line for assembling that land.

Mr Burns: If you want to put it this way, it's in a steady state at the moment. Because I didn't come with this file or review it in the last 20 minutes, I'm going to withdraw off from speculating.

Mr Carr: But surely that's a project you must know.

Mr Burns: I once knew it extremely well.

The Acting Chair: Mr Carr, for Hansard's sake, we're going to have to have only one person speaking at a time. I don't mean to single you out by that, but for all members.

Mr Burns: I once knew it very well and at one point I did talk about the forecast numbers in some detail at the estimates committee. I'm hesitating now because I don't want to be speculative. I want to give you a more genuine forecast. I think if the committee would like that, I'll do that by letter to the committee and follow up and answer the question in the terms that you've given it.

Mr Carr: The total amounts. There's some legal agreement between Toronto and the province too?

Mr Burns: We've negotiated a windup agreement to the project in its former state, but that's not the same as saying what I think the costs are now and what might happen in the future under a couple of scenarios, which I take it was your question.

Mr Carr: Yes, because it isn't just the Ontario government; it's Toronto as well. Let's put it this way: If you have anything to do with it, we won't have any more situations like this in the province of Ontario.

Mr Cordiano: You can guarantee that?

Mr Burns: The decision as to whether or not you embark on urban renewal sponsored in the public sector is fundamentally a political one.

Mr Carr: Is that what we're calling it, urban renewal?

Mr Burns: It was an urban renewal initiative.

Mr Carr: A very bad one, I would say, as it turns out.

Mr Burns: The decision as to whether you do those things is fundamentally a political decision.

Mr Carr: I wish there was more time.

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Interjections.

Mr Carr: Yes, actually, it isn't this government; it is the previous government. I'd almost forgotten that; you reminded me.

Interjections.

Mr Carr: And the former mayor is now running federally too, probably, but I wish we could explore a little bit more, but I know Mr Tilson wants to get to a couple of things, so I'll pass over now.

Mr Tilson: Just to assist the committee, there is a number of things that you referred to at the beginning of your presentation about answers to questions that you were unable to answer on Friday to assist us as to future deliberations.

Would it help the committee if you reduced some of these answers in writing or could you reduce some of these answers in writing so we could determine which topics that it might be appropriate to have you come back and spend more specific time on?

Mr Burns: I think your own agenda and how you want to operate is in your hand and you can make up your own mind. In terms of my providing material, as I did in March, two things I think have been asked, a consolidated request for ministerial workplans that relate to subjects covered in the draft recommendations as you have in front of you. We've begun that work and we can't provide that material. In addition, Friday and today, we've been asked somewhere between 5 and 10 more specific questions about particular areas which we will collect the information and write to the committee about. My forecast is that neither task should take a huge amount of time, but they are slightly different.

Mr Tilson: I'm thinking specifically one of the questions that I asked you had to do with operating agreements, and it may well be that a response in writing might adequately answer that.

You had mentioned the issue of consistency in developing units. Consistency in methodology, I think, were the words that you used. It's an issue that certainly, in the brief tour that I have had of some of the developments in the area, and I've showed you two of them and I'd like to show one more because I do think it would be useful in the future that members of the committee see some of these because I would submit that there is a lot of inconsistency even within certain areas. I've given one area in the Beaches and I've given the Waverley Road and there's another area which I'd like to refer to now which is called 10 Ashdale in Toronto. I appreciate that it's not large enough to see, but we can pass this around as we did for the other one, and this is the last one that I have.

The Acting Chair: It's a shame.

Mr Tilson: Yes. I'm sure you'd like to see more, and there are substantially more developments.

Total cost, the total land acquisition cost $225,625. The total renovation was $35,000. This consists of two units, and I assume you don't know about this project either. Two units at a cost of $142,848 per unit. My question to you is, do you have a written policy that determines the amount of cost that is going to be needed for renovation?

Surely, if you're going to be putting the amount of money into it, and this is just one example, to renovate a particular project, you should be getting the land at rock-bottom prices and not --

Ms Harrington: What year was it?

Mr Tilson: I'm not too sure. The information that I have doesn't say that and that can be made available. I guess the comparison between the cost of acquisition and the cost of renovation, in this particular case, and I know, Mrs Harrington, what you're talking about, the relevancy of an acquisition of land at a particular time, but at the same time, the cost of renovations, the same proportion should be there.

In this case, it was $225,625 to buy the place and $35,000 was spent in renovation, all for two units. Do you have a written policy that deals with that issue?

Mr Burns: I'll ask Mr Schafft to talk a little bit about that.

Mr Schafft: Basically it is an acquisition and rehabilitation and it depends on particularly the group, what it's putting forward as far as the particular needs for the client group. Obviously the overriding factor is the MUPs, the prices of what you're paying for. The MUPs are looked at. Again, in the acquisition, you are looking at not more than 75% of the total cost obviously for -- you're looking for a reduced level so that something is under MUP for an acquisition and rehabilitation.

Again it depends on what the group is looking for, the location. The group may be looking for other things, but if that's the only location they can find for a particular client group, that's where it may be put. So again the overriding factors in looking at the cost determinations -- one is the MUP, and then clearly looking at what is the cost of rehabilitating those particular units or unit.

Mr Tilson: Mr Schafft, all I'm saying is that the reasonable developer, if there is such a person left, would not spend $142,848 per unit for two units. I can't believe they'd do that. Yet, the province of Ontario, in its wisdom, decided to. There's no rationale to that. This is in the same area which, at the other end, the Waverley Road, is at $318,692 per unit.

I guess I'm looking for a policy, in clear English, with due respect, that explains the rationale as to why, for social housing -- and that's what this is; you're using taxpayers' money for all these expenditures. You have at the one end Waverley Road, and you've seen the picture of it, which is $318,000, and at the other end a project that doesn't look, without being insulting, quite as grandiose as the Waverley Road project, at $142,000, almost $143,000. I'm guess I'm looking for a rationale that the ministry has that can explain to the taxpayer who's footing the bills on this thing as to why the Ministry of Housing's doing these things.

Mr Schafft: As I said, the guidelines and what we are looking at clearly are the maximum unit prices so you know what you're building, or I should say any renovations that are going on so you have clear understanding. Again, the groups are looking for locations. The ministry is reviewing that and analysing the cost factor. If it does meet at the moment what we call the old MUPs, those are the prices we're dealing with and not using them as the maximum, but trying to negotiate and make them lower.

Mr Tilson: All right, Can you tell me whether the ministry knows of any non-profit housing units that are completed and rented and are in difficulty? Can you tell me that?

Mr Burns: Just let me see if I understand the question: financial difficulty?

Mr Tilson: Any kind of difficulty. You're right. Good point: financial difficulty.

Mr Burns: At any time, because we're funding 1,500 organizations, there are some that are experiencing financial or managerial difficulty. The number that there are right at this minute in our system, I don't know the answer to that. I think we would have to create a definition that would be acceptable: What is financial difficulty? Is it just a disagreement about a particularly bad year --

Mr Tilson: Difficulty in operating.

Mr Burns: -- or is it a large-scale problem where they're on the verge of bankruptcy?

Mr Tilson: Financial difficulty to me is that you acquire a certain amount of funds to operate each year and if you don't, you're going to have to raise the rent or the province of Ontario's going to have to substantially increase the subsidies: those types of projects. You must know which projects and how many there are, as to whether or not you're going to be putting substantial amounts of money for subsidies to solve some of their financial difficulties. All I'm trying to determine is, how many of these projects are there?

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Mr Burns: In my time in the ministry, to my knowledge we've not had to do a comprehensive financial restructuring of an existing operating provider in our programs. There are a number under the federal program -- I said this on Friday -- who are going through a financial restructuring right now. In past history, there have been --

Mr Tilson: The Homes Now, specifically.

Mr Burns: We are not negotiating a financial restructuring of any provider who's running a project under Homes Now, as far as I know at this moment, but you've asked and we'll go back and canvass our regional offices and make sure that I'm aware of everything.

Mr Tilson: I'm amazed that you don't know that, particularly when the next issue is, "Well, if they are having difficulty, then how much subsidy is going to be required?" because if you --

Mr Burns: As far as I know, in the two years that I've been in the ministry, we have not done a financial restructuring. I'm aware that there have been some in the past. To give an example, there was a restructuring done in Toronto where a group essentially went broke, was restructured and Cityhome ended up as the operator. So it has happened in the past.

Mr Tilson: Other than that one, there are no non-profit housing developments that you know of, to put it in simple English, that are having difficulties paying their bills.

Mr Cordiano: You cover their bills if they're having difficulty.

Mr Burns: I used careful words. We're not doing a financial restructuring; that is, their finances are in such bad shape that you have to remortgage it and start over again. That's a measure of someone in really deep trouble. I think in some of the ones in the federal program, that is exactly what's happening.

That's not to say that there aren't some who have run some vacancy loss and who may have run an operating loss in a particular year and are in a bit of financial difficulty they've got to work their way out of. There are certainly a number in that situation, but again, to my knowledge, we aren't negotiating the financial restructuring of anybody in our program right now.

The Acting Chair: I'm sorry, Mr Tilson. You've run out of time.

Ms Harrington: The first thing I wanted to clarify with you as Chair is what we've decided today. I've heard two things: first of all that there will be time set aside on Thursday to deal with this draft report, and secondly -- this is for the opposition's edification -- that from my understanding, we have agreed to one other time, and that was specifically to look at the work plan and the time lines that the auditor had requested last Friday. Is that correct, Mr Chair?

The Acting Chair: My understanding, at least as to looking at the draft report, is that's in closed session on Friday morning; as to agreements as to what we're going to do in terms of coming back, if I can consult with the clerk. The Friday sessions are for the university accountability and GO Transit and we have not scheduled time for a draft report on this, in fact. I do believe there was discussion about getting the ministry officials back in response to both particular questions and the set of questions that the Provincial Auditor put forward, which included as part of it the work plans. I don't believe that has been scheduled and obviously cannot be scheduled until the House comes back.

Ms Harrington: I'd like to put on the record that at this point in time the committee has agreed to do that, to look at the work plans and time lines that the auditor has asked for from the ministry and that I presume would be a one-time event. In the last round, about an hour ago, Mr Cordiano informed me that Thursday there is a time in camera to deal with this draft report. Is that not correct? That's why I'm asking the Chair and the clerk.

Mr Cordiano: Wednesday.

Ms Harrington: Was it Wednesday?

The Acting Chair: It's Wednesday afternoon. Yes, there's a closed session on Wednesday.

Ms Harrington: Just to clarify, then, this report will be dealt with this week.

The Acting Chair: At least to the extent that there's information available, I assume. There may not be everything available at that point.

Ms Harrington: We do have the draft report, and that's why we're asking the ministry to explain any questions we have about its response to it. I think the next step for this committee once we're finished this round of questioning is to look at the draft report.

Mr Cordiano: It's an awkward position, but I'll try and clarify this if I may.

The Acting Chair: As the normal Chair.

Mr Cordiano: As of last Friday, we had agreement among committee members that we would finish up with the questioning period today and deal with the document that was provided to us by the ministry in order to schedule additional time at some future date when this committee reconvened, when its normal sitting time is held when the House is in session. We would at that point have had an opportunity to wade through this document. As you can see, there's quite a lot of material to deal with.

Ms Harrington: That's what I was referring to.

Mr Cordiano: We want to have some working time for the committee to digest the information, then come back and order our timetable according to that document, then have the ministry come back at a future date, once we've gone through the document, and then determine what it is that we want to ask it.

Ms Harrington: Okay, I understand that. We agreed on that last Friday. But what I just am trying to clarify is that this draft report that Mr McLellan has written will be dealt with this week in closed session.

Mr Cordiano: That ties into all of this. We're not going to conclude on that draft report. It will become part of the overall report once we deal with this document. The two go hand in glove; they're one and the same thing basically.

Interjection.

Mr Cordiano: Sorry, I'm just trying to clarify this situation.

The Acting Chair: The auditor had something he wanted to add after you're finished.

Mr Tilson: A point of order, Mr Chairman: My understanding is that the draft report of Mr McLellan that we've been referring to throughout is a report of May. This is a report that was prepared in May and it's certainly not a draft report. Now we're still trying to get more information so that we can complete a report, and Mr McLellan will be preparing another draft report for the committee's consideration. This is not the draft report.

The Acting Chair: I think that's correct.

Ms Harrington: I would like to ask a further question.

The Acting Chair: Just before you do, the auditor indicated he had something he wanted to say.

Mr Peters: The point was pretty well made. That's why, very deliberately, the questions do contain the page reference to the draft report of the committee. I raised them to help the committee come to a conclusion, but it will not be able to conclude without having the answers to those questions.

Ms Harrington: I see.

I would like to look at something which we have touched on before, that is, the first recommendation. The housing allocation system is a very hot topic in Niagara. What the committee has recommended is that the ministry ensure that the local market conditions are addressed and that the residential units are located in areas of greatest demand.

My question is, what is the role of the local municipalities in these allocations? I note in the papers you've supplied today that you've talked about the new system as moving to a two-stage process, and also a redefining of core need. It might be good if we could ask Mr But to come forward and talk about this and explain it very clearly.

Mr Burns: This is Nick But, a manager in our policy group, who's responsible for designing the program. I think this is the third time he's come to talk a little bit about the planning allocation methodology.

Mr Nick But: The new methodology is moving to a two-step process. There's a recognition, both in our consultation and the framework, and within the ministry, that we had a statistical model that measured an abstraction called core need. In addition to that abstraction, we had to try and find some way of getting communities involved in defining their own needs.

The process of doing this is taking a long time. We did our new unit distribution model, and that was done by ministry staff. Again, it was a statistical model used to distribute units to the administrative regions.

We're currently in the process of designing a local process where each region would be taken and analysed in depth as to what the needs were, in addition to the statistical information that's used from CMHC and the numbers that we generate ourselves from waiting lists and from projects that we already have on the ground. We will be having community consultations. We will be working with local municipalities, with planners, with people at the local level, to determine not just current needs but to try and get some perspective on the future.

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This program itself will produce units over the next couple of years, and within each subsequent wave we want to try and refine our knowledge of what the local markets are in more detail to determine both market need and the need for rent-geared-to-income units.

The market need has been very often seen as the yardstick by whether a community got units or not, and what we're trying to do is say, well, even when you have low market need as measured by vacancy rate, all those units could be at the high level, they could be at a very high rent level, so you would still have need for market units at more moderate prices. So the communities will be involved over the next year or so.

We have participation from all our regional offices in the design of this new process and we anticipate being completed by the end of this year.

Ms Harrington: So by January 1994 this process should be in place.

Mr But: Yes, the communication.

Ms Harrington: And will it vary from region to region like the different field offices you have? Will they have different plans, or will they be the same?

Mr But: Well, the methodology will be the same, but the outcomes will be different because every region in the province is different. The needs in the north are very much different from the needs of Metropolitan Toronto and the greater Toronto area, so the outcomes will be quite different, particularly when you're trying to project ahead and look at the future.

The housing requirements, that's the identification of how many households are going to form in these different areas, will require both statistical methods and discussions with communities, because every community has an official plan, or I guess most every community, and they have some sense themselves what direction they're going in. It's an ambitious undertaking, but we did recognize that more work had to be done in this area.

Ms Harrington: So you're talking about things like public meetings and consultation with the planners in a local municipality.

Mr But: It's anticipated that there would be public meetings, as there are now for individual projects. This would be more like meetings to discuss plans for whole areas. We've hired social demographers and consultants to help us develop these methodologies so that we have a good sense, not just from our own view of the world, but other perspectives on the world.

Ms Harrington: Thank you very much. One other thing I wanted you to comment on -- maybe Mr But is the right person to do this as well -- is about our initiative with regard to native housing in Ontario. What stage is that at?

Mr But: The aboriginal component of Jobs Ontario is being designed separately from the mainstream program. We're currently working with aboriginal groups. I should say, they're doing the work and we're providing the advice. We have four provincial aboriginal organizations working -- they're funded by the ministry to work together to come up with a program designed for the aboriginal component.

At the present time we have a good format. These are groups who traditionally have not talked together that are now talking together and are planning together for how the units should be allocated.

Ms Harrington: Do you see that how native housing will be built different than what we have been doing in the rest of our housing units?

Mr But: Today, the main differences seem that there will be more focus on the types of units built, that they don't want high-rise units because their culture doesn't -- well, they don't have high-rise units and their focus will be more towards being integrated into communities and having communities themselves.

The structure of the program and the design of the accountability structure, we are insisting that it be the same as the regular program, but there are some negotiations on that, because there is a view towards self-government and what that would entail for the aboriginal people living off-reserve.

Ms Harrington: And I know there is some urgency as well. We don't want to let it drag on; we want to get these units out there soon.

Mr But: We hope to do a proposal call February or March of next year with the new design program.

Ms Harrington: Okay, thank you very much.

Mr Wiseman: I'd like to move into another area, and that has to do with how the budgeting is done. I've had a number of conversations with people who work in my riding about non-profit housing, and they brought up this idea of having the capital and the operating budgets somewhat together so that they could actually move money around and spend it in a more efficient way. Is that a good idea? Has it been implemented and have you been able to do any work in terms of what kind of savings could be acquired by doing something like that?

Mr Burns: I take it by "capital" you mean maintenance-type investments, part of an annual budget allocation or a budget arrangement?

Mr Wiseman: They have money to buy a tractor, but they don't have any money to put down the grass; that kind of stuff.

Mr Burns: In the past we've used a very detailed form of budget control that approved things right down to quite detailed subcomponents and then had to approve changes to that in the year. However, Consultation Counts indicates that it's our policy intention to move to a budget relationship that covers fewer subjects more flexibly, that reduces the amount of discussion, dialogue, we have about small things and concentrates our discussion on big things like training and norms and standards.

I think that simplifying the budget relationship in combination with an incentive-based arrangement will let individual housing providers be much more effective managers of their resources in relation to their own needs than the system we have now where we have a tremendous administrative overburden on relatively minor matters and we don't invest enough time in system-wide issues like training, establishment of norms or best practices.

Mr Wiseman: It would seem to me that if we were to remove some of the layers on consultation between the groups, it would free up a lot of time, effort, and even in terms of money; it would make the system even more efficient. Would it not be possible to do that but also maintain some kind of control of where the money's spent through auditing and statements as opposed to having all these detailed rules?

Mr Burns: You can get some compensation through the financial reporting and auditing for the kind of detailed review we get now. You can get some compensation or some benefit out of just concentrating on the key elements rather than on rafts of details, and you've described the general direction we want to go in.

Just in terms of training and talking about training, I think we've got a training need with the audit community as well in terms of ensuring that people who are auditing operating non-profits and co-ops are aware of the structure that they're operating within. Some auditors who provide services in our sector do a fantastic job; others I think are not being as helpful as they could be to the system, so that's another part of making all this effective. Audit advice is, of course, directly to the operating non-profit co-operative.

The Acting Chair (Mr Callahan): I'm sorry, that actually finishes the time, according to my watch anyway. The auditor would like to ask one question which arose out of the material.

Mr Peters: Just one very quick question following up on the presentation. I was most interested in the presentation that Nick But just made for us on the needs analysis. At the earlier time when we met, as you know, the needs analysis and the allocation model were one of the bases for our report, and one of the answers we received at an earlier stage was that at the current time there was construction of a number of units as a buffer -- I think that was the word used at that time. I think that was the report that was made to this committee. I'm wondering how far this new methodology of assessing the need will go into eliminating the construction of units on a buffer basis. I don't know whether that's a fair question, but it just strikes me that --

Mr Burns: I'm not sure "buffer" is a term that we would ever use on our side, but it may well have been used in the dialogue. Is this part of the discussion we had in March?

Mr Peters: That's right.

Mr Cordiano: Written documentation in response to the auditor's concerns.

Mr Burns: Can we go back? In our letter to the auditor from a year ago?

Mr Peters: The letter of March 5.

Mr Burns: To be honest, I can't recall the correspondence where that term may have been used. We will go back and look for it. I could speculate on what I think it might mean, but that would be unproductive. We'll go back and look and give a real answer to the question.

The Chair: Okay. Thank you for appearing before the committee. This concludes our session for today. We're in recess until 10 o'clock tomorrow morning.

The committee adjourned at 1701.