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What do Ontario HSA regulation changes mean for your co-op?

Published April 06, 2022

Ontario Minister Steve Clark stands outside Mimico Co-op in Etobicoke with members and co-op housing leaders. They hold signs that say "I support co-operative communities".

Minister Clark tours Mimico Co-op, an HSA co-op, in November 2021.

On March 31, the Province of Ontario released new regulations that are a positive and important step forward in creating a fair and sustainable future for Housing Services Act (HSA) co-ops when they reach the end of their mortgage.

  1. The Province released two regulations:
    O.Reg. 241/22 amends O. Reg. 367/11 and has rules for service and exit agreements under the HSA.
  2. O.Reg. 242/22 also amends O. Reg. 367/11 and includes rules on service levels, including household income and asset limits, and access.

Last week, CHF Canada welcomed the changes in a media release. We thank all the co-ops that have supported our Fix the Formula 4 Co-ops campaign.

This article outlines CHF Canada’ s initial analysis of the regulations and provides our early advice on how HSA co-ops near the end of their mortgage should work with them.

Service Agreements

When co-ops reach the end of their mortgage they can sign a Service Agreement with the Service Manager that moves them into a new section of the HSA. Most of the existing rules of the HSA, such as the funding formula, triggering events and remedies no longer apply. Instead, the rules will be contained in Service Agreements which are negotiated between the co-op and the Service Manager. The provincial regulation sets out minimum standards for what must be in a Service Agreement, including:

  • A minimum term of 10 years, which automatically continues unless a new Service Agreement or Exit Agreement is signed
  • Funding provided by the Service Manager:
    • The Service Manager must provide a rent-geared-to-income (RGI) subsidy equal to the difference between what the member’s RGI housing charge is and the market rent in the co-op. This means that the existing operating subsidy calculation based on the benchmark formula is gone.
    • Any additional funding to reduce non-RGI housing charges or to enable the co-op to maintain the co-op in a “satisfactory state of repair and fit for occupancy.”
  • Financial plans must be part of the agreement and developed together with the Service Manager. Plans must:
    • show how revenues will meet operating expenses as well as projected capital expenditures;
    • address how market housing charges will be set, and
    • extend for at least five years and be reviewed at least every five years.
  • The number of RGI units, or other assistance if it applies. The number of RGI units can be different than the co-op’s current target:
    • The current HSA rules for RGI units will continue. This includes use of the access system, eligibility for RGI and calculation of RGI housing charges.
    • RGI members at the time the agreement is signed will continue to receive RGI subsidy even if the target of RGI units has been reduced.
  • Any special needs housing, such as modified units. The agreement must say how any new households for special needs units will be selected.
  • If the co-op has a mandate to serve a specified population, this must be included.
  • A plan for dispute resolution that will be followed if there is alleged non-compliance with the agreement.

Our early analysis suggests that HSA co-ops should be able to negotiate reasonable agreements that support long-term financial sustainability given this Service Agreement framework.

Exit Agreements

Co-ops may exit the HSA when their mortgage ends. To leave, a co-op must negotiate an Exit Agreement with their Service Manager, in which:

  • Households on RGI subsidy continue to receive RGI or an alternate form of assistance if they agree.
  • Co-ops agree to:
    • continue operation of the housing project themselves or with another housing provider; or
    • redevelop the project themselves or with another housing provider; or
    • reinvest the proceeds from any sale of the project into affordable housing.

Income and asset limits

Service Managers must make local rules requiring households who access RGI assistance do not exceed income and asset limits. Previously, Service Managers were allowed to make rules, but were not required to. Whether this is a change for your co-op depends on whether your Service Manager had made these local rules before.

Income limits apply to the income of all household members and mean the household is ineligible for RGI if the total household income is above the income limit. The income limit set by the Service Manager must be at least at the household income limit set out in O. Reg. 370/11 but can be higher. The rule only applies to those on the waitlist, not to members already receiving RGI.

Asset limits apply to the total asset value of all household members and must be set at no lower than $50,000. The regulation includes a list of assets that are not included in calculating the value of assets including:

  • Registered Retirement Savings Plans (RRSP)
  • Registered Retirement Income Funds (RRIF)
  • Registered Education Savings Plans (RESP)
  • Registered Disability Savings Plans (RDSP)

Service levels

Service levels are the number of income-assisted units a Service Manager funds. The new rules slightly expand the types of assistance that count to a Service Manager’s service levels. In addition to RGI units, they can count some other forms of income-tested assistance they provide.

Preparing for end of mortgage

It is still early days in understanding all the details of the new rules and there is lots of work ahead for co-ops and CHF Canada. The first co-ops are reaching end of mortgage this year and will need to begin working to negotiate Service or Exit Agreements with their Service Manager very soon.

For co-ops that reach end of mortgage (EOM) this year or early next year, you should begin preparing for your negotiation. A good first step is to contact CHF Canada’s co-op services and planning staff or your local federation. We can give you more specific advice based on your situation.

Another important step is to begin preparing your own financial plan as it will assist you in your negotiation. An important part of this plan is have a good quality, recent Building Condition Assessment (BCA). Once you have that, you can have a detailed Asset Management Plan professionally developed which will provide the information you need to negotiate. CHF Canada’s Asset Management Team can assist in developing your Asset Management Plan.

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