Private, for-profit residential development is a difficult business. It requires skill, knowledge, risk mitigation, flexibility, financial resources, and dogged perseverance.

Public, non-profit, affordable housing development is exponentially harder: public funding — federal, provincial, or municipal — is extremely limited, and the entire cost of development and construction must come up front, before a single dollar of rental income.

When taxpayers see money going out the door but no tangible results, often for years on end, it’s no wonder that they lose patience. Politicians similarly struggle with projects that take longer than a single election cycle to generate results.

Council established the Housing Corp in 2018 to spur affordable housing creation. It provided the Corporation with just over $900,000 in grants between 2018 and 2022, equivalent to 0.3% of the County’s operating budget during that period.

In 2022, PECAHC returned almost $290,000 in exchange for two parcels of surplus, institutional lands, one on Disraeli and the other on Niles Street. There has been no further municipal funding.

So, what has PECAHC done with the money?

Both properties were environmentally contaminated. All the clean-up costs and liabilities became ours.

Post-transfer, environmental testing determined that the Niles Street property was more contaminated than anyone had realized, due to toxic materials within the old Duke Dome.

Environmental remediation is not an option. While it was expensive, both sites are now clean, safe and ready for development. They are also more valuable.

Post-clean-up, the vacant lands have increased in value by $800,000 and are now appraised at $1.48 million.

Maximizing land value is important as it can be used to leverage the financing of future projects.

After the clean-up came the permits. A mid-rise developer can expect to spend between 6-12 percent of a total project budget prior to the start of construction on municipal fees, permits, designers, appraisers, surveyors, and engineers.

About $70,000 has been spent on the Disraeli Project, which is now construction-ready – only 2.5 percent of the project budget.

A public RFP process, developed and run by PECAHC staff, required bidders to include a full building design and consultant package as part of their bid. That meant the cost of the design consultants was borne by the successful bidder.

Niles Street will be developed the same way.

Through strategic leveraging of limited resources, PECAHC has remediated and re-zoned the Disraeli site, run a public RFP, engaged a modular builder, completed a building design, negotiated a construction contract, and secured funding, including Bank financing, for 90 percent of the project costs, all for just 2.5 percent of the project budget.

I call that highly responsible management of tax-payer dollars.

But why is it taking so long? 

The average development timeline in southern Ontario for a small, mid-rise project like Disraeli Street, on lands requiring environmental clean-up and re-zoning, is around 4.5 years. That is from land acquisition to tenants moving in.

PECAHC acquired the Disraeli lands in late 2022 and expects tenants moving in around mid-2027. That is 4.8 years.

Niles Street, which is five times the size of the Disraeli development, is about 12 months behind Disraeli. But that is on purpose.The Board wanted to work through any development challenges on the smaller project before turning to the larger one.

Why won’t all of the Disraeli Street units be Affordable?

Any viable business has to balance the books. As part of getting the Disraeli Project construction-ready, the PECAHC Board, in consultation with professional appraisers and lenders, prepared a detailed and conservative financial plan for the 3-storey, 8-unit rental building, which currently includes three Affordable units (38%).

Every one of us knows there is a finite amount in our bank accounts each month and a long list of expenses to cover.

An apartment building is no different: rental revenues must cover all the building’s operating expenses, contribute to a reserve fund, and pay the mortgage.

Operating costs for the Disraeli Project will be $150,000 a year.

Canadian banks are a very conservative bunch. Before any of them will agree to finance a building project they want to know that your revenues will exceed your expenses by 10-30 percent, depending on your operating track record.

The bank required PECAHC to demonstrate that the building would earn about $175,000 in annual revenues. Divide that income by 8 units over 12 months and the average unit rent needs to be $1,825 per month.

“Affordable” has many different definitions. It generally means a housing unit rented out at 20 percent less that the average market rent.

An affordable, two-bedroom apartment in PEC should rent at about $1,600. An affordable one-bedroom is about $1000.

If all units at the Disraeli project were set at those rates, the revenues would not cover the expenses, and the banks would refuse financing.

This is the same problem every developer, public or private, must struggle with. A combination of affordable and market units means a financially viable project.

PECAHC is working to increase the number of affordable units. More equity up front will increase the down payment, which would mean a smaller mortgage and lower rents.

PECAHC is pursuing provincial, federal and private grants in the hopes of maximizing affordable units on all projects.

The PECAHC Board is full of energetic, experienced development professionals, volunteering their time. They believe in their mandate to ensure every dollar is wisely spent in service of meeting the County’s Official Plan target: that 25 percent of all new housing units should be affordable.

Creating housing that everyone can afford is a goal that we should all be able to stand behind.

Hilary Spriggs is a member of the Prince Edward County Affordable Housing Corporation. She has 30 years of experience as an architect and developer of high-rise, mixed-income residential buildings.