Wednesday 10 March 1993

Annual report, Provincial Auditor, 1992

Ministry of Housing

Daniel Burns, deputy minister


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

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

Cousens, W. Donald (Markham PC)

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

Frankford, Robert (Scarborough East/-Est ND)

Haeck, Christel (St Catharines-Brock ND)

*Hayes, Pat (Essex-Kent ND)

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

O'Connor, Larry (Durham-York ND)

Sorbara, Gregory S. (York Centre L)

*Tilson, David (Dufferin-Peel PC)

*In attendance / présents

Substitutions present / Membres remplaçants présents:

Daigeler, Hans (Nepean L) for Mr Callahan

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

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

Marchese, Rosario (Fort York ND) for Mr Johnson

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

Poole, Dianne (Eglinton L) for Mr Sorbara

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

Also taking part / Autres participants et participantes:

Peall, Gary, director, ministry and agency audit branches, Office of the Provincial Auditor

Peters, Erik, Provincial Auditor

Clerk / Greffiére: Manikel, Tannis

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

The committee met at 1009 in room 151.


The Chair (Mr Remo Mancini): The standing committee on public accounts is called to order. We're continuing with our review of the 1992 annual report of the Provincial Auditor as it relates to section 3.12, non-profit housing.

Yesterday members of the committee heard a presentation by the Ministry of Housing and we heard from the deputy minister, Mr Daniel Burns, and other senior staff members. Mr Burns and others are back today for further questions. We'll be meeting this morning and this afternoon. Unless there are any points of order, points of privilege, points of clarification --

Mr Noel Duignan (Halton North): Points of whatever.

The Chair: -- points of whatever, we can get right into our questioning. Do the ministry officials have anything they want to tell us before we get started, or was all that looked after yesterday?

Mr Daniel Burns: Just to touch briefly on two questions left from yesterday for today, we will have someone here to make a presentation at 2 on the fair-share model and on the work we're now doing to try to make it more sensitive to conditions in Ontario communities.

Second, Ms Poole asked us to address the questions that we're looking at in what's called the program review, that is, the review of capital costs and operating costs, and that material is just close to being done. It's not quite ready yet. When it is, I'll ask you when you would like to deal with it.

The Chair: Maybe this afternoon. That will give you the rest of the morning to put it together. Is 20 minutes enough? Do you want more? Is 20 minutes okay? Ms Poole, 20 minutes.

Ms Dianne Poole (Eglinton): I'd like to go over a couple of things at this time that we didn't really touch on yesterday. One was the annual subsidy level for non-profit housing. The figures used in the auditor's report were quite different than those being publicly portrayed by the Ministry of Housing. The auditor, on page 127, has said there's "an average annual subsidy per unit of about $12,500 ($15,000 in Metropolitan Toronto)." Ministry documents I have, one of which is a speech given by Evelyn Gigantes in April 1992, which in fact was the very time the auditor had finished his report, stated that the annual subsidies are under $9,000 per unit in southwestern Ontario. In the central region they are about $12,500. The provincial average is $11,300, not $15,000 as critics claim.

We even have a more recent update. In August, we held the estimates for the Ministry of Housing and I had tabled a substantial number of questions with the ministry for answering. One of the questions related to the subsidy levels, which is somewhere in this package. Again, the ministry was using the current subsidy level as approximately $11,000 to $11,300 per unit per year for recent commitments. There's a trend downward as interest rates decline.

I wonder if perhaps the ministry could confirm what the current subsidy levels for non-profit housing are on an average basis, including a special category in Metro, and second, what they were at the time of the auditor's report.

Mr Burns: I think, given the detailed nature of the question, I'll make a couple of preliminary comments and then we will endeavour to collect the numbers you were alluding to.

Let me just first say that we have to be careful we're not comparing an apple to an orange here. The numbers you refer to, I believe those numbers relate to our whole portfolio of non-profit housing that we're supporting. I believe the numbers the auditor is referring to are increments to the system that were in process at the time the audit was going on. Because they came through an expensive period in terms of development costs, their subsidy levels will be higher than our general base. Third, our costs are dropping as a result of changes in conditions. Those are three general comments.

You asked some specific questions: Will I confirm our average across the whole system, will I confirm that increments to the system at the time the auditor was looking at them were in this magnitude and will I confirm that costs are dropping. I'll ask for those specific numbers to be put together and give you the second half of an answer when I have them.

Ms Poole: The reason it interests me is because the private landlord sector has been giving out numbers such as $12,500 as an average and $15,000 in Metro Toronto, which are the figures the auditor used, yet they do differ significantly from figures we have seen from the ministry. I'm wondering if there is indeed a rationalization for your using a different basis for comparison. Perhaps after you've answered, I could ask the auditor the same question about how they came to these particular figures.

Mr Burns: My belief is that we are looking at different universes of projects. I will test my hypothesis with our actual statistics and give you some more answers later.

Ms Poole: Okay, then maybe we'll go to the auditor, or perhaps, Mr Chair, should we wait until we have the information from the ministry?

The Chair: Is there any information we can receive now that might help us?

Mr Erik Peters: We are fairly clear in our report that we talked about the rent subsidy, and I'm going to ask Gary as to where our numbers came from.

Mr Gary Peall: These numbers are calculated from the projects that actually came on stream, so as they were committed, we calculated on a monthly basis what the subsidy would be and divided by 12 to get the figures that we had on a monthly basis.

The Chair: What were the figures again, just so we know what we're talking about?

Mr Peters: They are $12,500 average and $15,000 for Metropolitan Toronto.

Mr Peall: But as the ministry said, it is based on the information of the units that were being completed at the time of the audits, so that's a lot of the things that were approved in 1989, 1990, 1991 and they would have had some of the higher cost components in them. It isn't an average for the whole system; it's what was there at that time.

Ms Poole: So it's an average of what you looked at in 1991-92, all the projects you looked at, or all the projects in the system at that time?

Mr Peall: Not 1992. It was up to the end of 1991.

Ms Poole: And all projects in the system then?

Mr Peall: Yes, under the new non-profit program, like 1986 on. I think you were mentioning that there are other non-profit projects. The deputy was mentioning there are other non-profit projects that weren't part of our audit.

Ms Poole: For instance, some of the federal-provincial projects that were prior to 1986 would be factored into your numbers, but not necessarily the auditor's?

Mr Peall: That's right.

Ms Poole: Would that be an accurate way of stating it?

Mr Burns: That may well be true, and I'll just check on that. That's my belief.

Ms Poole: So it may not actually be that one set of numbers is inaccurate and another is correct; it may be that they're just dealing with two different things?

Mr Peall: Yes.

Ms Poole: We'll look forward to receiving those numbers later.

One of the things we haven't touched on yet, which is a fairly serious one, is the operating agreements, which are really the mechanism for establishing accountability between the ministry and the non-profit groups. There has been a major concern that these operating agreements are not in place. I would like your comments on that particular section of the auditor's report which is contained on page 134 and part of 135.

Mr Burns: We agree that this is quite a significant problem. I touched on this briefly yesterday, but perhaps, just to give a little bit more material, we have completed negotiations with the cooperative housing sector for a standard operating agreement, and that agreement is now in the field for execution by all of the people who were funded under that arrangement.

We have also created a work plan to finalize our negotiations and the basic operating structure with the municipal and private non-profits. That work is going on at the moment. So our goal is to have dealt with this situation in this year.

I should say one other thing about the current situation. Most people are operating with some level of agreement with us. Just about everybody has a memorandum which covers the basic terms of our relationship in the interim until there's an operating agreement. The auditor said that this is not a perfect instrument, and he's right. So it is a priority of ours to replace them with full and proper operating agreements.

So just to go back to the beginning, we agree this is a weakness and we're addressing it.


Ms Poole: I think it's some four years since the operating agreement concept was introduced and I just haven't heard any really satisfactory explanation for the delay. What are the types of difficulties that you're encountering? You say, for instance, that you have reached an agreement with the non-profit cooperative sector but not with the municipal non-profits. Could you tell us something about the rationale for why it has taken four years and we still don't have those in place?

Mr Burns: A decision was made four years ago to begin by doing a cooperative operating agreement and then to go on and do the municipals and privates after. There's nothing dramatically wrong with our discussions with the municipals and privates; it's just that there was a sequencing set up at the beginning. Several processes -- not several; it's been one process. There have been several efforts to close this discussion over that period of time, but we've only finally closed it in the last number of months.

Ms Poole: Could the province have moved unilaterally in some of these cases where you were having difficulty reaching an agreement or would that have posed its own set of problems?

Mr Burns: It certainly would have posed problems. I suppose in extremis -- if somebody just refused to bargain in good faith or to adopt an operating agreement, we could simply withhold our subsidy flow. But I don't read the history of this as bad faith, just several efforts to come to grips with some difficult issues that didn't fully mature.

Ms Poole: When you were reviewing the costs of the non-profit program, the information you'll be giving us later today, did you touch on the whole operating agreement scenario or is that done separately?

Mr Burns: The absence of operating agreements is a well-known fact of the system and all the parties to the process, whether the operating non-profits or cooperatives through the ministry or -- the operating non-profits' own auditors all wanted that issue closed. There has been a process under way in the ministry for some time to address it before the audit report, but we've only closed the first part of it in the last number of months.

Ms Poole: Do you have a target date for when you expect the municipal non-profit sector to have that operating agreement under control?

Mr Burns: What we've talked about is completing the negotiations on the structure of the agreement by July. If that succeeds, then the execution will take place in this year which, as I said before, is our general goal, to clean up the rest of it.

Ms Poole: I have some other questions, but I think my colleague Mr Cordiano wants some at this time.

The Chair: You have eight minutes.

Mr Joseph Cordiano (Lawrence): I wanted to go back to a couple of areas and I'm not sure we touched on those. Again, one happened to be with regard to the long-term liability undertaken by the government in the form of guarantees for securing mortgages on these various projects. Do you have an accounting of what, to date, is the liability that would accrue to the provincial treasury for all of these various projects in the form of guarantees for the mortgages?

Mr Burns: They're not guarantees in the sense that the Treasurer issues a loan guarantee to surround a commercial transaction; it's embedded in our agreement to support operating costs under the terms and conditions of the program. That's one part. The second: What is the total volume of financing that's on the social housing sector out there and what's the total value of the mortgages?

Mr Cordiano: Not really. What it really comes down to is this: the point is, the government, if these mortgages are in default, would then guarantee payment on those mortgages. Really, I'm trying to make the point that there is a contingent liability for the government.

Mr Burns: There have actually been a couple of cases where operating non-profits and cooperatives have failed, in financial terms, and they have been, in effect, taken over. What has happened so far is that they've been rolled to another non-profit or cooperative operator and refinanced, essentially, to make it an ongoing, viable project.

Mr Cordiano: The point I'm trying to make is with regard to some of the comments that have been made in the auditor's analysis that some of the projects are being subsidized far more than had originally been anticipated. I forget the passage in the report, but there were comments with respect to some of these subsidy levels having reached 64% to 80% of the occupancy, so that you had a very small proportion of the rest of the units that were basically at market level or with no subsidy at all.

Do you understand what I'm trying to get at? What that causes, eventually, is an ongoing operating cost in the form of subsidies for the government, and you're not getting the market rents that were, I would imagine, factored into the overall financial picture of those buildings.

Mr Burns: I think I touched on parts of this yesterday, but over the period of 20 years that we've had non-profit programs, there has been a steady movement away from a relatively small proportion of households in poverty on rent-geared-to-income arrangements -- in the first generations, it was about 25% -- to a much higher percentage. We're now running about 75% of households getting some level of rent-geared-to-income support.

Mr Cordiano: In non-profit units?

Mr Burns: In non-profit cooperative housing, yes.

Mr Cordiano: That speaks to my point.

Mr Burns: Some of them are higher, up to and including 100% in some circumstances. The federal government in particular has wanted to move as strongly as it can in that direction and focus the program as much as possible on households in poverty. That does raise, as you just said, the annual amount of subsidy that's required to support a particular project from the format that was used 20 years ago.

On the question of what happens if there's a default, up to now the practice has been to seek a new non-profit operator to continue to operate the project under the broad framework, rubric, of the program.

I suppose it's theoretically possible that you would want to sell the project at the end, and at that point the mortgage would be retired by some combination of the sale price of the project and the residual liability of the province. But I personally think it's unlikely that will happen. Because of the financial stake everyone's had in creating housing to service a particular community, you'd want to continue that.

Mr Cordiano: In effect, what I'm trying to say is that the financial viability of some of these projects is very much dependent on a continuation of the rent-geared-to-income continuing at that level, 75%, or even 100% as you've suggested, of some of those buildings. That's obviously a concern because you're now talking about operating subsidies accumulating and increasing over time. In addition to that, you've now changed the circumstances, actually. When we were the government, the whole notion behind non-profit cooperative housing or projects of this kind was to have integration from groups of all income levels. Obviously, that's changing the mix quite radically now. Where you have an entire building being subsidized, obviously you're not getting the mix that was intended. Is that now a new approach the government has undertaken with respect to the policy, or is it a consequence of market conditions being what they are?

Mr Burns: The shift came some years ago. It's not recent. Partly it was a response to market conditions. The gap between --

Mr Cordiano: When did that shift occur, exactly? Because as far as I'm concerned, when we initiated some of these programs --

Mr Burns: In the mid-1980s in the federal-provincial program and in the provincial program.


Mr Cordiano: I don't think that's accurate. I would question the accuracy of that statement. As I understood it, when we initiated the programs in the mid-1980s, the intention was to have a mix, an integrated housing policy.

Mr Burns: Perhaps, Mr Cordiano, if I could go on and address that question as well, then I could give a complete answer.

As the gap grew between economic rent and market rent, the response in the funding of non-profit housing was to change the eligibility rules for some level of rent support. So when I say that 75% of the households have some access to rent-geared-to-income, I do not mean that those households are 100% drawn from the poorest households in society, as they are in OHC.

Mr Cordiano: I understand that.

Mr Burns: It is banded. What's been the practice in all non-profit programs, federal-provincial and provincial, since the mid-1980s is to have what is called a targeting plan which bands the households economically, which results in a mix at the end of the day.

You might, for example, have 40% households in deep poverty, 40% households of quite modest incomes and 20% at the market rent level. At the end of the day, the distribution of incomes, the household composition that has created, is not a whole lot different than what was created 15 years ago under the first program formats.

But that banding and targeting plan approach has been in place in the federal-provincial program and the provincial program since the mid-1980s.

Mr Cordiano: That really wasn't the focus of my question.

The Chair: Sorry; time's expired. You'll have to pursue that line of questioning in the next allocated round of time. Mr Tilson, 20 minutes.

Mr David Tilson (Dufferin-Peel): I still have a concern over issues that were raised yesterday, and that has to do with the information that is coming from the ministry and the information that's in the Provincial Auditor's report. Some of the topics we've already discussed and I trust will be clarified soon, and they are the items with respect to the construction of units as being $135,000 per unit as opposed to $158,000, which are the figures of the Provincial Auditor. That is what we discussed yesterday.

There are other topics, such as the cost that the ministry is paying for existing units. The ministry says $63,000; the auditor says $70,000. The more important figure, which I have a lot of problem with, is, the Provincial Auditor has indicated that there is waste, in the entire non-profit housing system, of $200 million. That was presented when the Provincial Auditor made his report. The minister, Ms Gigantes, back in December, in a question from the leader of the Progressive Conservative Party, Mr Harris, acknowledged many of the issues the Provincial Auditor was raising.

When we look at Hansard, which has been given to all members of the committee, on December 1 she said, "I think the point he makes is a good one" -- referring to the Provincial Auditor -- "and that the maximum unit price which was suggested for the programs, particularly in the high-cost Metro area, was one which was not sensitive enough, and in fact we are working very hard now to make sure that the new program design will reflect not only increases in maximum unit price, but decreases." There are other areas where she acknowledged the concerns of the Provincial Auditor.

Then of course we got a letter addressed to this committee, which was dated March 5. I'm going to be referring specifically to page 3. This has to do with the $200-million waste issue. Mr Burns, your ministry has said:

"Most of the $200 million was attributable to the indexes and methodologies employed by the audit. The auditor's analysis converted all of the units into two equivalent units. This, as demonstrated above, substantially inflates the actual cost of housing." Then you go on to other items. I'm sorry, this is at the top of page 3. Then you go on to other statistics. As I say, some of this we discussed yesterday and some of it we haven't. Then in the concluding paragraph on the bottom of page 4:

"Taken together, the ministry has estimated that these factors explain about $180 million of the auditor's $200-million estimate. In the ministry's view, this analysis shows that we did not pay the substantial premium, as concluded in the audit."

I have a lot of problems with all of this. We have the minister back in December saying there are problems. Then we have a letter that was just dated a week ago or two weeks ago, whatever, saying that the ministry has concluded that the figures the Provincial Auditor has aren't correct. Notwithstanding the fact that there's still $20 million of waste -- you are acknowledging that, that there's $20 million of waste -- you are saying: "No, it's not $200 million of waste. In fact, that should be subtracted by $180 million."

I have a lot of problems with the Provincial Auditor saying one thing, the minister agreeing with that and then the ministry staff coming along in the first part of March and writing a letter to this committee saying, "Well, it depends on how you look at these figures." I would like to hear, first of all, from Mr Peters or a member of his staff on this issue. I'm being very general because we're talking about a number of issues.

Quite frankly, the Ministry of Housing has challenged the Provincial Auditor's report; that's the way I look at it. I would like the Provincial Auditor to inform this committee and particularly to comment on the remarks made in the letter of March 5 addressed to this committee, specifically pages 3 and 4.

The Chair: Mr Peters, did you want to respond?

Mr Peters: Yes, I'd like to address that point. What we did use in our report was a model. I believe that what was stated on March 5 was, again, one actual example and also some modelling on behalf of the ministry. I believe this can hopefully be put to rest now that we're about a year past that.

I would like to ask the ministry, essentially, if it could provide, for the years 1989, 1990 and 1991, the actual cost by unit -- by type of unit, that is; whether it's a hostel bed right up to if it's a three-bedroom whatever -- and if March studies are available that show what the private sector cost of those units was in those particular years, so that the committee will have an idea what the actual cost incurred by the ministry was in this non-profit housing area, and at the same time be provided with some idea what the private sector was charging for similar years.

There was another offer made by the ministry in yesterday's presentation in which you said that you would like to get together with us on a model. I'm becoming increasingly concerned about whether we will actually develop a model. Ultimately, we'll find a model that everybody will challenge again. It may be best to just deal with actual information. As you know, that actual information was simply not available to us when we did the audit, even for the other years. Even in the presentations now, there are models used in samples. It may be for the benefit of everybody if we really have a picture of what the actual situation is. We'd be willing to cooperate and look into that with you.


The Chair: Does that answer your question, Mr Tilson?

Mr Tilson: I'm becoming more and more alarmed about this subject. It appears that the ministry is terribly unorganized on this subject, which is a very expensive project, the whole subject of housing.

The Chair: Could I ask, Mr Burns, how long it would take to compile the information the auditor suggested?

Mr Burns: At a minimum it will be days, not hours. This is one question that I don't think I can agree we can answer in the 24 hours left in these discussions. But I think the way the auditor framed the question is quite right. We should be operating with actuals rather than modelling. We can access the real numbers and break them down in the format he suggested, but it will take some time to do it in that way. I would like to do that, following on the kinds of questions that were asked yesterday.

The Chair: If that's the case, then we may have to revisit this specific item some time in April when the Legislature convenes.

Mr Tilson: There's no question, Mr Chairman, that I believe this information should be made available not only to the Provincial Auditor's office but to this committee.

The Chair: Absolutely. It's a request of the committee and the auditor understands it.

Mr Peters: That was my request, that it be made available to the committee and that we would work together on it. Could I add another information piece that relates directly to the question you asked as well?

Mr Tilson: Yes, thank you.

Mr Peters: The other point that was raised was the entire question of adjusting the maximum unit price also to the actual cost. I think Ms Poole raised that question yesterday and I think there was something in the question Mr Tilson raised on that. Again, there may be some worthwhile clarification because, even looking at the slide presentation of yesterday, there is one slide which relates the achieved prices in relation to MUP, which shows about a 10% maximum drop from MUP in the later years, in 1991-92.

At the same time, there was a slide presented that showed that the private sector cost of comparable units had dropped by 25% in that time. It may be worthwhile if the ministry could also provide some explanatory comments on that difference.

Mr Burns: We'll get you the information on that, sure, as much as we can.

Mr Tilson: Thank you. Mrs Marland has a brief question.

Mrs Margaret Marland (Mississauga South): First of all, I want to give my apologies to the committee. I was scheduled to be here the first two days of this week as the Housing critic for our party. Unfortunately, I had to attend a funeral in England of a beloved family member, so I regret that I'm coming in today having missed two days.

But I'm very concerned, just in the last statement by the auditor where he said that the actual information wasn't available when they did the audit. How can the auditor be expected to do an audit if actual information isn't available?

Mr Tilson: It's still not available.

Mrs Marland: It's unbelievable. How can the Provincial Auditor go into any ministry and have to deal with models instead of facts? This isn't a fantasy land we're dealing with; we're dealing with millions and millions of dollars of taxpayers' money. In spite of the fact that all that money is being spent, we still have thousands of people who need housing. I want to know why the figures weren't available. I want to know today why those figures were not available to the auditor when they did the audit. Why did they not have actual information?

Mr Burns: Mrs Marland, it's not that we don't have information; it's that the information is in our workplaces, and in order to make the kind of assessment the auditor wanted to do, he would have had to visit and investigate a large number of files in a disparate set of locations. The approach taken was to take a sample and to try to bridge from that sample to a broad assessment of the situation. It was not that information was not available in our ministry, but that it would have been a large amount of work to tackle it all.

Mrs Marland: Mr Burns, you are responsible for millions of dollars of taxpayers' money in this province. If you can't operate the Ministry of Housing as a business, you should not be in the job you're in. I'm sorry; this is not a personal attack of Mr Burns; it's a personal attack of whoever the deputy minister happens to be.

The deputy minister is paid very well to hold a very responsible job and if your answer is, "We couldn't get the information in time because it's in our various workplaces," my question to you is, are you saying that because these figures are out in different offices, you don't at any point have them all under your thumb in your office?

You have to be a business person when you're operating a business and I would suggest that the Ministry of Housing is a business and you have a responsibility to the taxpayers of this province. I do not accept the answer that you couldn't give the information because it was in "various workplaces." Mr Tilson just told me this information was asked for in April of last year and then again in June. Is that correct?

The Chair: I believe she's asking you.

Mr Peters: Are you asking me?

Mrs Marland: Whoever.

Mr Peters: Not specifically. Those were the two dates at which we presented our reports for factual clearance. We presented the first draft report in April 1992 for factual clearance by the ministry and the final report was issued in June. Then the summary appeared in our annual report in December, so the information we had modelled was available since April.

Mrs Marland: So almost a year later the answer we're still being given is that we can't have this information today in front of the public accounts committee because you obviously didn't find it necessary to have that information. Are you still saying it's out in the various workplaces, that you as the deputy minister cannot give that information today from your office? Is that what you're saying, that you don't know?

Mr Burns: Mr Chairman, Mrs Marland's made a number of points that I'd like to respond to. Yes, the Ministry of Housing's responsible for a substantial amount of money and, yes, good business practice is an important part of what we do.

The design of the audit and whether you use a universe which is everything or a sample is not something we determine. It's something the auditor determines as he designs his approach to our material.

As to the question of whether the information that was just asked for could be provided instantly, the answer to that is we do have the underlying data that would have to be looked at, but that's a large amount of information. You can't just simply wave your hands and have it come out in the format that was asked for in the particular discussion we're having here this morning.

Mr Tilson: But the concern, Mr Chairman, that Mrs Marland and I have is that from the Provincial Auditor's first preliminary report, which was in April, to the Provincial Auditor's second preliminary report in June, to Ms Gigantes being asked questions in the House by Mr Harris in December, it took until March of this year, and as a result of a decision by this committee to question the whole subject of non-profit housing, it took all that to get the Ministry of Housing to come along and say, "Well, it all has to do with number crunching as to whether you're talking about models or whether you're talking about all of the facts," and today we find out, as Mrs Marland says, that we still don't have all the facts. We're going to have to go out and corral them all.

Mrs Marland and I have a lot of problems with this and I guess the question we're asking is, okay, so you've said it's going to take a number of days. Why can't you have this stuff instantaneously? Why can't it be in your office, in the deputy minister's office?

Mr Burns: There are three points I'd just like to touch on. First, in relation to the comments of the minister in the House, I think I said yesterday that the maximum unit price itself is a blunt instrument and should be revisited and tackled differently. We're in fact having an intense discussion with the federal government right now about that subject.

Secondly, I said that the practice we followed in 1991-92-93 in relation to the MUP changed in order to deal with the very uncertain times we were in 1991 and then the clear downward track of costs in 1992-93. The blunt character of the MUP in relation to tracking market conditions is a problem. The auditor pointed to that. We agree with him and I think the minister agreed with him when she made her comments in the House.


On the question of whether there have been discussions about the methods that were used last year to try to get our cost structure, there were discussions between the ministry and the auditor last year about those subjects, both at the design phase of the audit and in relation to the draft reports. Our letter to the auditor clearly indicates that we think there were weaknesses in the methodology and what they were.

Mr Tilson: Mr Burns, the purpose of the questioning was that you knew in April, you knew in June 1992, you knew in December 1992, you knew in the request of this committee to discuss this whole subject that you were going to have to have all of these facts. You knew that, yet today you still don't have them, and this is the whole crunch of this issue.

It gets back to the very first question we asked. There's $200-million waste that's being alleged in your ministry and you're saying, "Well, it's not really that; it's $20 million," which is an astounding admission alone. Notwithstanding that, the auditor is saying: "We need this information. We've needed it since April 1992."

The Chair: You'll have to continue your line of questioning in the next allocated round of time. Mr Kormos.

Mr Peter Kormos (Welland-Thorold): What did the auditor have access to when he came to the ministry in the performance of the course of the audit? In other words, what was available to him or his team, his people?

Mr Burns: Following the standard practice of any organization being audited, the auditor had access to any and all material the ministry had in its possession relevant to the design of the audit. We spent time, obviously, in the design phase and then in making material available that fit with the design. Now the design, as we know from discussion yesterday, was based on sampling, not on the universe.

Mr Kormos: That's interesting. You're also indicating that information is spread out among regional offices. Is it regional offices that we're talking about?

Mr Burns: Yes. If you're going to go into the depths of a particular project or file, the comprehensive working file for a project is lodged, in our case, in the regional offices.

Mr Kormos: And that file has actual cost?

Mr Burns: Yes.

Mr Kormos: It has a complete description of the particular project?

Mr Burns: Yes. I think yesterday you'll recall we walked through the stages of approval. All the documentation that relates to any stage of that process is contained in a master file which is in our regional offices.

Mr Kormos: How many regional offices are there?

Mr Burns: Six.

Mr Kormos: How many projects are going on at any given time?

Mr Burns: As I think I said yesterday, 1991 was the peak level of activity for the ministry, the highest level of activity since 1970-71, 20 years earlier. So central region alone would have had at least 200 active projects and the rest of the province would have been a larger number than that.

Mr Kormos: When you're talking about projects, a couple of hundred in central region alone, those projects would range from what at one end of the scale to what at the other end of the scale in terms of magnitude and size?

Mr Burns: They range from an individual dwelling to an apartment complex of 200 units or more.

Mr Kormos: Would it similarly range from these turnkey purchases all the way to actual active construction projects?

Mr Burns: Yes. It's the full range of development methods, it's the full range of size, it's the full range of building type from wood construction to concrete, and including some acquisition rehabilitation projects, sites in urban contexts and in rural contexts. It's a very diverse program.

Mr Kormos: You also talk of a structure that, notwithstanding that it has been blessed by computerization, appears not to have been overly blessed.

Mr Rosario Marchese (Fort York): What is your --

Mr Burns: We do have today a quite well-established computer-based information system, but in 1991 that system was under development and installation. So the standard reporting, for example, that we would get at head office on all of the projects, which we do get, was based on much more of a manual system and on a fairly simple set of measures that we used to follow projects. That's not fundamental. If you're going to audit, you should go to the original material, and that is what the auditor did for a sample of projects.

Mr Kormos: Wait a minute. Did the auditor -- and obviously the auditor can join in if he wishes -- visit more than one regional office?

Mr Burns: The audit is based on looking at material in depth in three of our six regional offices.

Mr Kormos: And the auditor, of course, had available to his team any one or all of the files that contained all of the information that in fact we're speaking about right now during the course of questioning from opposition members.

Mr Burns: All the information on an individual project, yes. The auditor said earlier today actuals, and then looking at them with a certain kind of breakdown, that requires manipulating our database to get the specific kind of breakdown that was talked about here. We can do that too. It'll just take a little bit of time to do it.

Mr Kormos: I suppose, Chair, if I may and again, perhaps your response shared by the auditor and by the deputy minister -- I suppose the question is, were actual costs sought, and if they were, why wasn't access made into any number of these files that were available in any number of these offices?

Mr Peall: Actual costs were sought where they were available. In a number of the projects we looked at, the final capital cost statements in the process of the ministry outline were not yet in, so the final capital costs weren't necessarily known to the audit. When you had this many units coming on stream at that time, it was likely that a great number of those were going to be outstanding. All we had to work with was a summary listing of committed costs, what the ministry approved to go ahead with, that this would be roughly the committed cost of the project. It wasn't the actuals in the end, so that's all we had to work from.

We also worked with a total list of the 1990 and 1991 projects based on those committed costs. So the summary that we used for Metro Toronto, for example, was all projects we could identify readily from that listing as being in Metro Toronto. It wasn't a sample from the regions.

When we spoke to the ministry about using a sampling methodology, in a lot of the projects we looked at, arguments were raised that these wouldn't be typical projects and it would be dangerous to extrapolate the results of what we found in those projects. We did not use the ones we actually examined in the regions to do any extrapolation or modelling. We only used the listing of committed costs provided by the ministry and, as it points out, it didn't have a complete management information system to capture all the actual costs and the status of every project that we could just go to that listing and do our sampling and calculations from. We had to be a little bit creative to work with the data available.

Mr Kormos: Quite right, and the creativity is one that's a matter of a whole lot of -- and not to suggest that it was inappropriate under the given circumstances, but that's what's been the matter of a whole lot of contention right here over the last couple of days.

Mr Peters: I should jump in here. I think creativity creates a very artificial -- once you get into modelling as an alternative to assessing the actual situation and, as Gary has just described, the actual cost is simply not available, you then have to use your best judgement to develop a most reasonable model that you can follow. None of the information that has shown so far is that the model should have been different, based on the information that was available at that particular time.

What has been shown is that if there are other models available which could be developed a year after the fact or whatever, then we would get into a contest as to whose model is better, like who had more hindsight in preparing the model. Do I prepare a better model right on the spot or do I prepare a better one a year later, after everything has happened? I think that's sort of where the debate is going on right now. The point is that on a professional basis, the provincial audit staff did not create anything; it tried to resolve in the most professional manner a problem that presented itself.

Mr Kormos: Quite rightly, but I don't understand yet. The deputy minister says there were any number of files representing any number of projects. Obviously some weren't complete, in which case you didn't have capital costs, but numerous ones, obviously hundreds, were complete in which there were actual capital costs. Am I understanding you correctly?

Mr Burns: I don't this second know what the split would have been at the time the audit staff was in our field office between projects that were still in process. He was looking at a universe that included people who are still in the development process to some degree, as well as some who finished in the period that was being looked at. The final capital cost statement is a piece of the work that occurs at the end of the process, and out of that can be derived full actuals. So full actuals in the sense that we're now discussing this were not available for the universe they were looking at, because a large part of the universe was made up of projects that were still in the development process to some degree or another.

Now there's lots of information about those things: the preliminary cost estimates that Mr Peall alluded to and progress materials, and they're in the files. But final capital cost statements obviously can't arrive and be used until a project is fully finished. So when we came to prepare our presentation here, we went back to actuals and at that point almost all the projects that were looked at, whatever state they were in before, were finished. So the auditor said today, "Why don't we find a way to look at those in a particular format?" I think that makes some sense myself.

Mr Kormos: Did you select the sample that the auditor used to do the calculations?

Mr Burns: Obviously there's some discussion about sampling and access and those kinds of things, but when you have an audit done, it's always an auditor's call to determine the nature of the sample and the scale of the work. So, yes, there were some discussions, but in the end the auditor's staff makes the call.

Mr Kormos: I would ask the auditor, isn't there some risk inherent in sampling and extrapolating data from that sample?

Mr Peters: Yes, there is.

Mr Kormos: Especially when there isn't a universal and scientifically sustainable approach because of the diversity of projects?

Mr Peters: That's right. That's why our reaction this morning is that we do not want to compare models with models, because both have an inherent risk. I think the committee would be far better off now, with hindsight, to take a look at the actual information. That's why the request was made this morning.

Mr Kormos: And you -- I'm sorry, sir?

The Chair: Mr Marchese wanted to share some of the 20 minutes.

Mr Kormos: And Ms Harrington.

The Chair: Ms Harrington did also? And so does Mr Duignan, right? Okay. Well, let's try to do our best.

Mr Kormos: I've saved 15 minutes for Ms Harrington.

Ms Poole: You have a strange clock.

The Chair: Okay. You have until 12 minutes after 11. Please just jump right in.

Ms Margaret H. Harrington (Niagara Falls): Thank you very much. This is a very important and basic thing we are now discussing, and in fact I did raise some time ago with the ministry staff the numbers and why there wasn't access to the numbers. I think all the facts have been very well brought out now; that is, that we were in the middle of this process and that the building of units certainly does take some time. The other factor in this is the absolute number of units that were being built a year ago or more, and I think this has been raised in the audit as well. The pressure on the staff, especially at one of those three offices, was very great, but we all know that.

The conclusion I think we have to draw now is that there has to be a method, because in the years ahead, it is very legitimate that the people of Ontario do want to know and have a fair evaluation of the cost-efficiency of this program, so at any point in time it should be able to have some kind of snapshot of what it is costing per unit and look at that in relation to the other markets. That sounds very simple to say, but we all know, the auditor and the deputy minister and all of his staff, that that may be extremely difficult. But I think we have to strive to have that process. Whether it be using actual numbers or using a model type of system, it has to accurately reflect what is happening out there. So hopefully, from all this discussion this morning, that's a conclusion we can come to.

May I ask the deputy, do you think that working with the auditor -- I mean, he's the one who actually calls the shots -- would you be able to assist him in the next while in coming to some system whereby we can get a fair model or use the actuals?

Mr Burns: I suggested yesterday that I thought that was an important issue to address. As I mentioned just a few minutes ago, we have made some improvements in our technology, and that gives us a better capacity to have more extensive and perhaps timelier reporting from a field-based system. But of course we've largely been looking at that from a need to get information for general management purposes. I think what you've raised is that we should make sure that in the design and development of that, we get clear information that allows the Provincial Auditor himself, and others who want to get at some of the broad issues of cost, to do it using our system. I think that's important. I think we should do it.

Ms Harrington: What I'm asking is that the ministry assist so that there will be a method in place, that it won't have to be creativity every year on how to do this.

Mr Burns: Yes.

Ms Harrington: Okay, thank you very much.

There's quite a few other areas I'd like to get into. Certainly the most important is cost-efficiency in future and what we can do to look at that.

One thing I would like to bring up first may be even more timely: the question of selecting projects. There was some indication in today's press that there was a question around the process of selecting the groups. The groups are the non-profit people, who then hire a developer, so we're not directly dealing with developers at all, but my question is about selecting which groups get the allocations. This is a very important process, that the criteria are extremely clear and the process has to be very open so people can see what is happening.

I want to add one further thing. In the past, the larger, more established groups that knew how to do things well and maybe fit the system may have got lots of allocations; say, Peel Non-profit, very well-established groups that know how to deal with the ministry.

Mrs Marland: The original group.

Ms Harrington: Right, the original group. But I would say that possibly across Ontario now -- and I've been dealing with aboriginal groups across Ontario -- they may be very small places, like Little Current on Manitoulin Island. They may not have the background and expertise. How are we going to make the process accessible to smaller groups with less expertise? I also would like you to address that question of, is it a fair process?

Mr Burns: We touched a bit on the early stages of the development process yesterday. I showed some slides that give the basic structure of planning and approval under the federal-provincial program, a structure that was used almost exactly in the provincial Project 3000 and Project 3600 programs, which are part of this audit and which contributed in large measure to the way Homes Now was tackled.

In the opening stage, people are invited to make proposals. Non-profit sponsors are invited to submit proposals to the ministry, and in that opening proposal, they have to demonstrate a number of things: that there is a need and demand for that particular service, that they are a body corporate, that they are a capable body, and questions like that. That stage was subjected to an evaluation against a set of criteria and against the fair-share model of regional allocations, which we're going to discuss this afternoon. If they survive that evaluation, they could go to a second stage, where they'd have to meet some more objectives and have another evaluation.


So we were evaluating proposals made by non-profit sponsors. As you said, established organizations like Peel Non-profit well understood that and were very good at making sensible, practical proposals. Less experienced groups had a learning curve, and so they sometimes found it tougher.

One of the things we found in the consultation round in 1991 about the program was that people wanted to make sure that everyone understood what the ground rules were and there was some clarity about access to the program. So what we did in the proposal call we just issued in December was to change the nature of the call quite a lot. From something relatively general, we've gone to something quite specific. We've said in the proposal call: "Here are the mandatory requirements you must meet, and if you don't meet them, you won't even get a full evaluation. Here are the objectives we have for the proposal and here are the criteria we're going to use to evaluate your proposal. You must attach right now, right at the beginning, the material that's necessary to demonstrate to us that you've dealt with being a body corporate, that you've dealt with contamination issues -- " something we touched on yesterday -- "and a series of other clear guidelines."

We ran information sessions for people who might want to sponsor projects under the new program. When the next proposal call comes in the next month or two, we will run the same kind of training sessions for people so that, in addition to the clarity we've brought to the proposal call end of the process, we're also going to do some outreach and training for people who are interested in sponsoring so that they clearly understand the nature of the process, the nature of the ground rules, the nature of the evaluation.

Ms Harrington: I think the question was, is it a very fair process?

The Chair: I'm sorry. That'll have to wait till the next round. Mr Cordiano.

Mr Cordiano: I want to make a couple of comments with respect to what I think is largely becoming apparent in this exercise. I want you to please understand that what I'm about to say is not directed at your efforts, which I believe are sincere and that the staff under you is making all efforts possible to do what it has to do to make information available. What I would say is that you have not been mandated to do anything else and that you're trying to serve your political masters as best you can. I'm going to take that at face value.

But I'm also going to say this: In the time that I've been a member -- which is almost eight years now, and I've served on this committee on and off during that time -- we've investigated a number of complex issues on this committee over the years, ranging back to the domed stadium, which was very complex, the sale of UTDC and onward from there. But I've got to tell you something. In my experience, I've never come across a situation like this, where the information we're getting is totally inadequate for the magnitude or the scope of importance we're dealing with.

The dollars you're responsible for are enormous, yet we don't have answers to questions that are pretty straightforward. We don't have an accounting of what you're doing in a way for us to be able to determine whether what you're doing is effective or not. In fact, we've had the same kind of problems, not with a ministry directly but with quasi-public institutions; that we do not have and the auditor has very little authority to go in and do a value-for-money audit kind of situation.

I think it's incumbent on your ministry to undertake immediately effective management information systems, to implement those cost accounting and cost-management systems which would enable you to come before this committee and have at your fingertips the kind of information that has been requested and that you're unable to provide.

We're dealing, as someone said, in the realm of creativity and the realm of fantasyland with some of the things we're asking. Quite frankly, to us that's totally unacceptable. I think it's unacceptable to the taxpayers of the province. Therefore, there's a sense of frustration, at least on this side of the committee with the opposition members of the Legislature, who would like to get to understand what your problems are so that we can facilitate any improvements you have to make, which is what the objectives of this committee are all about with respect to recommendations we may make.

We see that you have problems; there's no doubt about that. But if you're coming before this committee to suggest that there are no problems and that what's unavailable to you is as a result of the nature of the area you're dealing with, that you can't come to grips, can't get a handle on exactly what you're doing, I would have to say that's not acceptable to us. I would say there are things that you must undertake in order to get a handle on what you're doing.

We're going to continue questioning what we see as problems for the next day and a half, but I've got to tell you, the answers are most unsatisfactory to this point. It's going to be awfully difficult to even ask questions that make any sense to anyone, because you can't put them in a format in which you can get answers that are estimatable, or in which the answers that come back make any sense to anybody. We're really dealing with equations that don't make sense, with unit prices that may or may not be accurate. We've got to have a better system than this; it's got to be. For the number of dollars we're dealing with, it's totally unacceptable.

Having said that, it's pretty difficult to go on and ask more pertinent questions that are specific in nature, because you simply don't have the kind of detail we require to be able to determine whether each of those projects you're dealing with makes any economic sense. I think that's a fair assessment of what we're dealing with.

Would you not agree with me that the systems you have in place now are inadequate and that you would need to implement a more effective management information system and a management accounting system that makes sense to all, that all can see, that is logical for us to determine what you're doing? I don't think that's something new. If we were to examine the books of any development company, I think we would certainly be able to determine whether it's being cost-effective on any project on any given day. I think there are methods you can use to do that, which hasn't been the case.

Mr Burns: Let me say a few things. First, as a matter of principle, I believe very strongly in open government and accountability. I think our practices and results should be understandable and reachable in any forum where we have an accountability relationship, and that includes this one. This is an important one. We didn't come here with any other perspective than that.

Second, we do have management practices and project management practices that deal with costs in individual files. Do we have the kind of general management information system that's been touched on a number of times this morning? Not in the form that's been described. Can we improve our management information system? Yes, we can. I think I said yesterday that we as a ministry believe in continuous improvement philosophically. These are things we have improved even since the time of the audit and will continue to improve.


I think that government business should be transparent: The rules should be clear, and the results should be clear. We have changed the beginning end of the program to respond to those kinds of perspectives, and I touched on that a little bit in response to a question from Mrs Harrington.

In conclusion, I'll just perhaps touch on what you touched on at the end, which is getting the management information system that makes this kind of dialogue simple as opposed to complicated. You did say it's a difficult business to create management information systems around, and it is, particularly with the volumes and the diversity that we actually deal with. However, I take your main point.

Mr Cordiano: It's got to be a priority for you, though, is what I'm saying. Perhaps it's premature for me to say this at this point, but there are a number of other areas we want to go into and we haven't completed this process yet. It's important for us to have a sense of that, that in fact we're dealing with insufficient information and that as we sit here and some of us become frustrated about the kinds of questions we're asking and the answers that we're getting to them, we have to --

Mr David Winninger (London South): We're frustrated with your questions.

Mr Cordiano: This is my time, if you don't mind, and I can reasonably say what I like and ask what I like. But I think it's important to note that the context in which we're dealing with this is with insufficient, at least inadequate, information. I think that's the sense of frustration that the auditor felt in going in to do an audit in your ministry with regard to this area.

Mr Burns: I appreciate your perspective, and in fact as we began to prepare for this presentation, one of the reasons we wanted to go back to actuals was to get a sense of what had actually happened and be able to provide that. When we finished that assessment and had that data, the first thing we did was sit down with the auditor's staff and review it and send it to him, and then, as you know, we made it available here. If there's a reproach, perhaps we could have done that a week or two earlier; we didn't. We did it as we began to prepare for this. I believe in sharing information and being as clear as we can be, which is why we did those things.

Ms Poole: Yesterday I touched on the issue of the costs of non-profit housing, the capital costs versus the capital costs in the private sector. Even though you and the auditor disagreed on what the figure was for the per-unit cost, two-bedroom cost, of a non-profit unit, even accepting your figures, there was still a substantially larger component for the non-profit capital costs than for the private sector. You helped explain this by talking about the land costs and the lag in time, the fact that units built in 1991 would have been purchased perhaps a year and a half or two years earlier, at the height of the boom. Fair enough, but it still did not explain away the enormous cost differential.

One of the areas nobody has talked about is this middle layer, the development consultants, the lawyers, the architects, the real estate agents, the developers, this whole infrastructure that's been built up and, to my way of thinking, that's completely out of control. I think this is adding an enormous cost to our projects.

I want to read you two excerpts from the auditor's report that was tabled with the ministry, and these are excerpts that did not appear in the final summary. They substantiate some of the concerns I not only have myself but that I have heard from supporters of non-profit housing.

"Development consultants, architects and appraisers were not acquired competitively although their fees were substantial. This not only added to the project cost but also left the ministry and non-profit groups vulnerable to conflict of interest."

In the second section:

"As well, we found that in 5 of the 12 projects reviewed in the central region, the development consultant and architect were the same individual or firm or were otherwise related. While such a relationship can be beneficial, the potential for conflicts of interest is high and could contribute to higher costs.

"In one of those projects, the development consultant had the following involvement: first of all, acted as the real estate agent for the non-profit group in the purchase of the site and received a 5% commission; secondly, was a director for the construction company building the project -- held 50% of the voting shares but apparently was not entitled to share in the profits from the project; and thirdly, was the property manager for the building as well as for several other projects completed by that non-profit group. We felt that at the very least the ministry should have required such potential conflicts of interest to be formally declared at the outset so that additional precautions could have been taken during proposal review and onsite inspections.

"As well, the ministry should consider compensation alternatives to provide an incentive for development consultants and architects to control projects' costs."

I think that's pretty damning and it certainly confirms what I have heard when talking to people and talking to groups out there. Could you tell me, as a ministry, what you have done to address this problem and what changes you have brought in to address this problem?

Mr Burns: You touched on four items, so let me proceed through them in the same order that you did.

When we were talking yesterday about our costs and what was happening in the private marketplace, that was in relation to the question of whether our costs should have fallen at the same percentage, if you like, that private costs fell. Our remark was that land costs in our program never peaked at the height at which they did in the condo market, so there was a much larger absolute and percentage drop on the private side than on our side. Those things are not inconsistent.

The second thing you touched on was a comparison of absolute costs as opposed to relative change in cost structure. I think you suggested yesterday that at the time when we were operating at $125,000 a unit or some number like that, the private sector was operating at $106,000, and that you derived that from some surveying you had done of private builders. I don't have access to any information that suggests that our cost structure, whether it was land, construction costs or the other elements of it, was particularly out of line with private numbers. If you have survey data or access to another data source that we haven't looked at, then I would be happy to look at it but I don't have any assessment of that sort myself.

The third point: In the real estate business there are a series of professional and managerial activities that have to take place in the building of a project. That's as true in the private sector as it is in the publicly supported sector. If you're building a large building, there will be an engineer and there will be an architect in all likelihood. If you're in the private sector there will be marketing, there'll be project management, there are fees associated with all of that on the private side.

On the social housing side, the necessary professions are all there and there is a function of project management in effect. They have come to be known as development consultants. They deal with the coordinating of the professions, of the construction process and other work that may be needed. It's not absolutely consistent, what they do; there's variation in how much service they offer and, obviously, variation depending on the type of proposal that you're dealing with.

Yesterday we talked about a couple of issues related to the function of professional services in relation to our program. You just touched on them again. The first is the absolute fee level, and I think I said yesterday that the guideline of 2% is derived from a period of time when the federal government ran the programs and that was their guideline, and that we have moved away from that guideline to a fee-for-service basis in the last 18 months and the real costs associated with that line in the budget have dropped.

Ms Poole: Mr Chair, if I could just interrupt. I'm sorry, but there are only a couple of minutes left and this is not getting at my question, which is about conflict of interest.

Mr Burns: Yes. I will get to conflict of interest in a second.

Ms Poole: Yes, but we're not going to have time to do it, and I really think that this is the crucial part. When I've been talking to development consultants and people in the industry, they have been telling me that there is far too much control in these hands, that you're not only talking about the fee; you are talking about a very incestuous relationship where they're feeding off one another. They're describing it as a boondoggle.

They have said that they have never seen the Ministry of Housing in such disarray in the non-profit program as in the last couple of years. In fact one of the development consultants I was talking to said she's going to leave the industry because she can't take it any more. That's what I want you to address, the conflict of interest. That's the crucial point.

Mr Burns: Sorry. You've framed it by touching on a number of points. Perhaps I misunderstood that you wanted them all touched on. I don't have any reservation about talking about conflict of interest at whatever length of time it takes to deal with your concerns.

The Chair: Can you do it all in two minutes?

Mr Burns: I'll start with two minutes, but I'll be happy to return to it.

The Chair: We've got the rest of this afternoon and tomorrow morning.

Mr Burns: So there's lots of time to talk about it. Conflicts of interest arise in private business, in the public sector, in a lot of different situations. They are not necessarily a problem, but good business practice, and certainly good practice in the public sector, requires their full declaration and for business to be undertaken in full knowledge and understanding of what those conflicts actually are.

As a matter of practice in the non-profit program delivery -- and this goes back to the federal time of delivery -- conflicts of interest were something that program administrators, federal or provincial, required in dealing with any file. But that requirement was as a matter of practice, not as a matter of regulation or contract or requirement. What we have done recently is convert that practice to something much more demanding.

First, last November we sent a directive to all our own staff on our practices in relation to conflict of interest, our requirements. Second, in the proposal call that we issued for the new program in December we had a section on conflict of interest which laid out not only the requirements for its declaration but also the requirements for business practices that would flow from any particular constellation of declarations.

I think that you're right that in talking about the program people have expressed concern about conflicts of interest in the last period of time; the auditor certainly did in his report. What that has caused us to do is review our practice and make much more explicit what our requirements are and make those requirements a condition of even applying for the program.

The Chair: I'll have to interrupt, unfortunately. Mrs Marland, this is going to be a 10-minute round.

Mrs Marland: Oh, are we starting with us with 10 minutes when everybody's had 20?

The Chair: Everybody's had 20 twice.

Mrs Marland: No, not this morning; only once.

The Chair: I'm sorry; you're right, yes. That was my error. I should have told you that earlier on. That's fine. We'll do 20.

Mrs Marland: Thank you. Mr Chairman, I think it's very important to get a couple of things on the record here. I think the fact that Mr David Winninger, the member for London Centre, says, "We're frustrated with your questions too," referring to the opposition, is very indicative of the total attitude of this government on this whole matter. I can't understand how any member on any side of the House --

Mr Winninger: Point of order.

The Chair: Interjections are out of order.

Mr Winninger: Point of order, Mr Chair.

The Chair: There's nothing out of order. Interjections are out of order, and we're already going to be sitting into our lunch-hour.

Mr Winninger: Point of order, Mr Chair.

The Chair: Mr Winninger.

Mr Winninger: My riding is London South, not London Centre.

The Chair: Excellent point of order. Thank you.

Mrs Marland: I'm sure the people in London South are very proud of their member, who objects to opposition members asking questions based on information brought by the auditor.

Mr Winninger: Point of order, Mr Chair.

The Chair: Mr Winninger.

Mr Winninger: I have no objection to opposition members asking questions. I was just sharing in the spirit of frustration expressed by Mr Cordiano.

The Chair: That's not a point of order. Your objections are out of order. Mr Winninger knows.

Mrs Marland: I think the questions that have to be asked on information raised by the auditor are very significant questions. I also think it's very important to state on the record that the Progressive Conservative caucus, at least in this province, is concerned about the availability of affordable housing for people who need it. We do have an alternative to non-profit housing programs in the form of direct shelter subsidies to the people in need. We do believe there are people in our society who should be assisted by the government in the provision of housing.

Our concern is that what is now evolving with the non-profit housing program, as has been well substantiated by this current auditor's report, is that the non-profit housing program as a provision of affordable housing simply isn't working. Quite frankly, when you read the auditor's report and you read some of the other articles and research reports that are now available on non-profit housing in this province, it's turning out to be one of the biggest scams in Ontario today. As long as non-profit housing is not addressing the needs of the people who most need that help, then there has to be an alternative.

Earlier this morning, I heard the deputy minister saying they are now going to have a road show to haul more people in, to tell people how they get into the non-profit program. I think it's irresponsible. I'm sure the deputy minister isn't going to disagree with the auditor's projection of a $1-billion annual cost for non-profit housing in this province by 1995. When you look at those kinds of figures and at the number of people who will be housed in those programs compared to the number of people who could be housed under a direct shelter subsidy program, then it's very obvious that our alternative of directly subsidizing the people rather than building the buildings makes eminent good sense.

I'm very interested to have read what Mr Burns, the deputy minister, said yesterday, because I think this is the most significant comment in support of what it is that we believe should be done. I quote from page 1115-2 of yesterday's Hansard. He says:

"Some level of vacancy is a feature of the rental housing market; in fact, in its largest sense, it's normally the object of government policy to try and create significant vacancy in every rental market. That's what disciplines rents and creates a situation that gives consumers choice in the marketplace, and we do have a number of markets in the province now with quite significant vacancy rates, and that applies to some parts of our stock."

If this is truly what this government is determined to do, then this is one big scam, because what is creating the vacancies in the market today, or contributing to it, is the availability of all the condominium units. We know this. You only have to open your daily newspapers to find why we have such high vacancy rates. Now we have a government, even with the existence of high vacancy rates, even with the existence of its rent control legislation, that is determined to continue building. You have to say that yes, obviously they're determined to continue building in the non-profit program, even after the auditor identifies $200 million of wasted taxpayers' money. They're proud, I suggest, from this comment, that they're contributing to the vacancy rates, even when the vacancy rates are in their own buildings.

I say this to you, Mr Burns: If you really are a businessperson, I don't know how you can defend creating vacancy rates in your own building stock. Frankly, when you talk about the rental market and about creating a situation that gives consumers choice in the marketplace, I want to ask you, what kind of choice is it to me, if I need help with my rent, that you stick me in a building that has a label as a government-assisted housing project?


It would be far more just to give me the rent subsidy I need, which is the difference between what I can afford on my income and the rent that's needed. If you give me the difference between what I can afford, then that means I can take that direct rent subsidy and I can go and decide where I need to live. I don't have to live in a government-owned building. Frankly, I then have a choice as to where I live relative to where my employment is, maybe my day care, maybe my family, maybe the community I want to live in. I then would have a choice as a consumer.

Frankly, earlier this morning we were discussing the percentage of people on subsidy in these buildings. The way it's going, we are reverting back to the old Ontario Housing model. I'm sorry, but as soon as you increase the level of people in poverty in one particular building, you're going back to the old Ontario Housing. I think it's unfair and unjust to ask our people in Ontario who need help with their housing because they simply don't have the money -- we support giving them that help, but I think it's unfair to segregate them into buildings that eventually have a stigma because they're government-owned and -operated.

You say in the next paragraph that I read from yesterday: "Now, what do you do about that? The non-profit renters in the market sector are going to have to do what private folks do, and that is address their terms of leasing, address their rent levels. But in some cases, they've come and said, We'd like to raise the number of households in poverty in our projects". Isn't that great? You're going to increase the percentage of people in poverty in one building, so they're all going to be segregated, they're all going to have the same label; they're not going to have a free consumer choice.

I suggest to you that these paragraphs contradict each other. When you say you're going to do what people in the private sector do, what are you going to do? You're going to start giving away trips to Florida or maybe free microwave ovens? How far do you think the government has to go to sell its business of housing? If that's what we're down to, if we're down to the government building non-profit buildings which have vacancies and now you're going to go out and sell them and promote them and increase the number in poverty in any one building, then you are going back to the old Ontario Housing models.

I'm suggesting to you that you can't talk out of both sides of your mouth and say this is not a scam. It is a scam. The non-profit housing program, apart from all the areas identified yesterday by Mr Tilson, my colleague, and were then asked again a few minutes ago by Ms Poole, about the examples of where the real estate agents have benefited and so forth and so on -- I'm not going to reread those examples that happened to be in the draft auditor's report which, coincidentally, didn't get into the final report. I'm referring to page 15.

Page 15, the Woodgreen community project: Maybe you'd like to identify for me whether the Woodgreen community project is the one to which the auditor is referring, where everybody got rich on the poor; everybody got rich on a non-profit housing project supposedly to help the poor. The $1-billion subsidy we're talking about by 1995 is not going to do anything about resolving the number of people on the waiting lists.

Would you tell me if the example on page 15 of the omitted draft comments of the auditor refer to the Woodgreen Community Centre? Is it or is it not the Woodgreen Community Centre that's referred to in that example? That's the only question I'm asking you.

Mr Burns: No, it is not, Mrs Marland.

Mrs Marland: It's not the Woodgreen?

Mr Burns: No, it's not.

Mrs Marland: Then this tells us that there are other examples. The Woodgreen Community Centre itself is a deplorable example of flipping properties, with the people in the middle benefiting from the taxpayers' investment and not the people who need housing in this province. Certainly it's an exploitation of government funds, there's no question, in the Woodgreen example.

So you're saying that this example that was omitted in the final report -- and it's very curious that it was omitted, because it's a very damning statement on page 15 -- is not the Woodgreen. Then I guess I'd like to ask you how many more examples there are similar to Woodgreen that have been uncovered, either by your staff -- which will be interesting, as your staff approves every single project. How is it, if your staff approves every single project, that you can have at least two examples of exploitation of government money?

Mr Burns: Mrs Marland, I don't think the two cases pointed at have many similarities. The one pointed at in the auditor's report had to do with whether proper declarations of conflict had been made and then proper business practices had been followed as a result. In the case of Woodgreen, as I understand it, the question that has been raised is whether the community centre and its associated community housing company should have undertaken a particular set of property transactions. Any real estate development -- not any, but just about every one -- does involve real estate agents as some part of the process, because there's usually a transaction.

In the market they were operating in, as we touched on this morning, the values for land exceeded what we were prepared to support in the program. That's particularly true in the city of Toronto but also in some other marketplaces. That put a number of non-profit sponsors to a difficult point. If they wanted to gather enough land to propose a particular project, they would have to deal with the disparity between what we were prepared to fund and the real market conditions at the time.

Mrs Marland: And did you approve the Woodgreen Community Centre project?

Mr Burns: Did the ministry approve a project there? Yes.

Mrs Marland: Yes. Knowing the facts about the flipping of property? Did you approve it, knowing the facts of the flipping of property?

Mr Burns: We don't in our program administration approve or not approve property transactions behind a proposal.

Mrs Marland: So you don't care how much they pay for the money or how they accumulate the land. Is that what you're saying?

Mr Burns: We care quite a great deal, and we say to them, "You must provide a project proposal that meets our program guidelines." At that particular point in time, we were not prepared to fund land costs that were as high as the marketplace. A number of sponsors, including Metropolitan Toronto and the city of Toronto, had to deal with that by putting in, in effect, some equity to make their proposal work in the market context of the day, and as much as I understand of this, that's what Woodgreen Community Centre chose to do.

Mrs Marland: So you approved the project knowing the background of the land flips that Woodgreen was involved in?

Mr Burns: We approved the project based on our cost guidelines. They tried to convince us to accept land costs higher than the program guidelines, and we would not. They then had to straighten out the situation.

Mrs Marland: I'm sorry. Mr Burns, did you know what was going on in the Woodgreen community project in terms of the land-flipping?

Mr Burns: Perhaps you should tell me what you mean by "land-flipping."

Mrs Marland: You know very well what I'm talking about. It was in all the newspapers. I asked the minister the question in the House last December. You know that in the Woodgreen example there were properties that were bought and sold the same day, for goodness' sake. Are you saying that, knowing all that, you still thought it was appropriate to approve this-

Mr Burns: Which-

Mrs Marland: Excuse me. When you're talking about a community project coming to the government and asking for taxpayers' money to fund a housing program -- in fact, as you said earlier, you're going to have this roadshow now to tell them how to do it. When you know of an example where a particular community group was doing things that were at best questionable, you still went ahead and would approve its non-profit housing program through your ministry? Is that what you're saying? You don't care what the background is of a non-profit group or who's involved or what's been going on in terms of land flips. You're still willing to give them government money to go ahead with their housing program.


Mr Burns: Mrs Marland, we deal with the non-profit sponsor in the terms of our program. They may try to convince us to --

Mrs Marland: That's amazing.

Mr Burns: -- allow more costs than program guidelines would allow, and in this case we did not. We are delivering a program. We are not Woodgreen Community Centre or the city of Toronto or Peel Non-Profit.

Mr Tilson: The question is, did you know about it when you approved it?

Mr Burns: Know about what?

Mr Tilson: All of what she just said, the flipping that was going on the same day. Did you know about it?

Mr Burns: Woodgreen Community Centre said to us that to complete the land that it wanted to have for its project it would have to incur costs beyond our program guidelines and tried to convince us to fund that, and we wouldn't.

Mrs Marland: So the answer is, you did know what was going on. Did you know what was going on with the Woodgreen Community Centre?

Mr Burns: Woodgreen Community Centre, just to be clear and specific, came to us and said, "We have to spend this amount of money to acquire this land. Will you fund that under the program?" and we said no. They then had to deal with the question of whether they were going to abandon it, whether they were going to write down the land cost or what they were going to do. That's the set of decisions that they made.

Mrs Marland: So you weren't concerned that they took the money out of a fund and didn't tell anybody? You weren't concerned with the background at all? This is appalling. On the one hand, if you'd said you didn't know --

Mr Burns: It's not the business of the Ministry of Housing to manage Peel region, Woodgreen or any other organization outside of ourselves. We're delivering a program.

Mrs Marland: I'm sorry. You're saying you don't care. It's not your business is what you're saying. You're saying it's not your business about how they do their business. I'm suggesting to you --

Mr Tilson: It is your business.

Mrs Marland: -- it is your business. You are responsible for giving public money to community groups to build non-profit houses, and you should be investigating what the business is of those non-profit groups.

It's not just a matter of dealing with the raw costs that come into your ministry. If you are not investigating the business ethics of the non-profit groups that are coming before you, I suggest you're totally irresponsible. The ministry is totally irresponsible. How can you possibly do business with a group whose actions might be totally illegal and unethical? You're entering into a 35-year contract with these people. You're funding their program with public money to provide housing for 35 years or whatever the length of the mortgage is. You're not interested in the kind of people you're doing business with?

Mr Burns: Obviously if somebody presents to us a proposition that there's illegal activity, then that's a matter to be referred to the police. As for ethics, our program process and guidelines are there. We have an established process and, in the particular case you're talking about, it's a group that had used the program before.

The Vice-Chair (Mr Cordiano): We've run out of time. We have approximately six minutes left. I'm going to turn to the government members. Mr Marchese, first, for six minutes, and then we'll complete this at 12 o'clock.

Mr Marchese: I want to pick up on some of the things that Mrs Marland has said and I want to completely disagree with so much of what she said, including the use of her word "scam" to a non-profit program.

I'm wondering what it is that she meant by it, because she simply said, "It's a scam," and I hope she'll get another opportunity to come back to it because I want to understand clearly what she means because, if you have a journalist hearing that, the person picks up a word like "scam" and it makes for a good clip. But I want to hear, when you come back, what it is that you actually mean by it.

I want to talk about shelter allowance and rental supplements, because I think that is the basis of what you're suggesting as a solution to this problem, which, in my view, is the wrongheaded thing to do. I want to talk about that. Shelter allowances are a short-term way to help people who need housing. They're an income supplement, but they're not a housing supply program. It's not part of a housing supply program. It gives people money, but it doesn't create housing. At the end of the day, not one cent of this money creates --

Mr Tilson: Of course it does.

Mr Marchese: I don't know. David, you'll have another opportunity. Come back to it, please. I want you to talk about it.

At the end of the day, not one cent of this money creates new affordable housing. So at the end people still may not be properly housed and the government has no additional housing to show for its investment.

Let's talk about shelter allowance and rent supplements, because this is part of an overall strategy that this government is part of and the previous government was too, and in some ways so were you. But shelter allowances, in terms of the overall housing pie, constitute at the moment 54% of the housing income of its total budget. Is that true or not, Mr Deputy Minister?

Mr Burns: The shelter benefit, which is administered by Comsoc, is over half of the total operating expenditures of the government on housing.

Mr Marchese: Okay. Over half. It's 54% of the entire budget of its ministry that goes into shelter allowance.

Mrs Marland: Tell us how many dollars.

The Vice-Chair: Order, please.

Mr Marchese: It's $2 billion and something.

The Vice-Chair: Order, please. Would you please place --

Mr Marchese: If Mrs Marland suggests --

The Vice-Chair: Order. Would you please place your questions to the deputants before us and not to members of the opposition, as that leads to --

Mr Marchese: Mr Cordiano, with all due respect, you spoke for five minutes. I'll look at the deputy as I say this, if this is what you want.

The Vice-Chair: I'm trying to make the point that if you direct your remarks --

Mr Marchese: But, Mr Chairman, with all due respect, you spoke for five minutes without addressing one question. In the space of one minute and a half, I not only made a statement but also asked a question. What do you want me to do?

The Vice-Chair: Fair enough. What I was asking you to do was to address your remarks to the deputants and not point to the members of the opposition --

Mr Marchese: Mr Chair, I will look at the deputant and I'll address my remarks to --

The Vice-Chair: -- so that we don't get any interjections, so that you may have your complete time for yourself.

Mr Marchese: When you're done, Mr Chair, I'm ready.

The Vice-Chair: I'm trying to be helpful. Please carry on.

Mr Marchese: So 54% of the entire budget goes for shelter allowances. Correct or not?

Mr Burns: Yes, the shelter benefit is 54% of total operating expenditures.

Mr Marchese: The difficulty I have is that if that is one of the proposed solutions for the opposition -- for the Conservative Party; I presume it's not for the Liberal Party -- they would have our entire budget consumed in that area. Perhaps not; maybe not. I shouldn't speak for them.

Let's go to the rental supplement. In my understanding of it, we contribute close to $130 million to rental supplements, which is another suggested solution. Is that correct? More or less.

Mr Burns: Yes, that's the universe, of which $79 million is in the commercial programs. Those are the ones that support tenants in the private sector, and the remainder is associated with the non-profit programs.

Mr Marchese: All right. So the combination of these two programs constitutes again -- am I wrong? -- 54% or 56% of the entire ministry budget? More or less.

Mr Burns: No.

Mr Marchese: There must be a chart here at the back.

Mr Burns: The shelter benefit is administered by Community and Social Services. In our ministry, the Ministry of Housing, the rent supplement program is a little over 10% of our expenditures.

Mr Marchese: Okay. What are we now spending at the moment, or at least, if you can remember, from the inception when the Liberal Party started getting into this area to the present moment, what percentage of the budget is being spent on non-profit cooperative housing?

Mr Burns: I think for the two years that we showed yesterday, of the total operating costs that the government incurs in relation to housing programs, the non-profit and cooperative programs were $400 million and $600 million in relation to $3 billion and $3.5 billion, so about 15% I think is the figure.

Mr Marchese: That's important for the record because there are so many misconceptions in terms of this whole issue that we need to talk about. Do we have any more time, Mr Chair, for now?

The Vice-Chair: You have a few more minutes.

Mr Marchese: If we decided to put a lot of our money into rental supplements or shelter allowance, whichever of the two -- I'm not clear what they might be proposing -- does it really address the needs of people with disabilities and people who might be very vulnerable other than people with disabilities, the needs of that sector of people in society? Would their needs be addressed if we simply shifted our programs and put all of our money or most of our money into rental supplements or shelter allowance?

Mr Burns: Mr Marchese, it's my understanding of this forum that the accountability is about the administration of programs and not about broad choices of public policy as between programs.

Mr Tilson: We'll help you with that.

Mr Marchese: All right.

Mr Burns: So I think it is appropriate for me to answer the questions about --

Mrs Marland: He doesn't want to answer your question.

Mr Marchese: All right. Don't answer it that way. I'll rephrase it.

The Vice-Chair: Order, please.

Mr Burns: I'll answer and have answered the questions in fact that you've asked, but I think that asking me to speculate on broad public policy choices should be another forum.

Mr Marchese: I'll rephrase it. Don't speculate. What do rental supplements do? What does that program, rental supplements, do?

Mr Burns: What does it do?

Mr Marchese: Do. What is the program? How does the money get allocated to people and what is the intended solution of it --

The Vice-Chair: I'm just going to interject at this point because we've run out of time. We could probably get the answer to that this afternoon. The remaining time is approximately 14 minutes in that round of questioning. We'll start with that at 2 o'clock. We're adjourned until then. Thank you.

The committee recessed at 1201.


The committee resumed at 1405.

The Chair: The standing committee on public accounts is called to order. This is the afternoon session, day two.

Mr Duignan: Day three.

The Chair: The first day was only private briefings. Day two is with officials from the Ministry of Housing. Mr Daniel Burns, the deputy minister, and other senior officials have been with us the last day and a half. We're continuing our review of the annual report of the Provincial Auditor, 1992, section 3.12, that dealt with non-profit housing.

Clerk of the Committee (Ms Tannis Manikel): We didn't finish that question. There are 14 minutes left if we want to finish off that round of questioning before the deputy starts.

The Chair: The clerk informs me that the government had a number of minutes left on its 20-minute round, 14 minutes to be exact.

Mr Marchese: Mr Burns, to continue with the questions we had earlier on, could you just describe what the rental supplement program does?

Mr Burns: Not wanting to be argumentative, but there are in fact several programs. Is it the one that connects to private sector landlords that you are interested in, what's usually called the commercial --

Mr Marchese: That's right. Isn't that what rental supplements are mostly used for?

Mr Burns: That's the largest part of it, yes, the commercial rent supplement program under a couple of different formats. It operates by contract with private landlords. Units are actually contracted by local housing authorities, which are part of the Ontario Housing Corp. Within those units, the local housing authority provides the tenants and the landlord provides the apartment. The Ontario Housing Corp, using program funds, pays the landlord a rent for the unit. The tenant is charged on a rent-geared-to-income basis. It's a contractual arrangement between local housing authorities and private landlords.

Mr Marchese: Statistically, when I look at your chart, that provides 2% of the ministry's budget? I just take it from the charts.

Mr Burns: That pie chart is not the ministry's budget, but rather all government operating expenditures by all ministries in support of housing objectives. It makes up a commercial rent supplement program, which is $80 million, I think less than 2% of the total, of the whole of government expenditures. It's about 8% of the ministry's expenditure.

Mr Marchese: Okay. Does the rent supplement provide any housing, or the housing is already there and the rent supplement helps the land owner because the money goes to him? But it doesn't provide additional housing, correct?

Mr Burns: It's a contract with people who own existing buildings.

Mr Marchese: Could you describe what the shelter allowance does? As I see that chart, and you could correct it if it's not correct, 51% of it goes to shelter allowance. Could you explain that program?

Mr Burns: This is the shelter benefit portion of social assistance. The shelter benefit is made up of two parts. It's a basic standard allowance made available to any recipient of social assistance and a second variable amount beyond that up to the level that is actually being paid in the marketplace by the household in receipt of social assistance further defined by an overall cap. That money is going to support the real shelter costs of households that are presently receiving social assistance.

Mr Marchese: Okay, and that's over $2 billion.

Mr Burns: This year it's well over $2 billion, yes.

Mr Marchese: The non-profit housing sector comprises 15%, as I see it here, and at the moment the expenditures to that are $605 million, more or less.

Mr Burns: Yes, and that's the 1992-93 expenditure estimates.

Mr Marchese: The advantages I see from that portion is that it creates jobs, because we're building, and it provides housing for people with special needs. With respect to that, what portion of non-profit housing that is provided to people helps people with disabilities, special needs? Do we have a sense of that?

Mr Burns: I don't have a number for the universe. In recent years a significant number of projects have been funded whose object is to house people with needs beyond shelter, plus other needs. But in addition, in our programs and in the federal-provincial program, we've increasingly required project proponents to make provision for people with special needs, whether that's physical handicaps or others, within a larger project context. There's been quite significant growth in that component, social housing, over the last 15 years. I can't give you an estimate of the precise proportion right at this minute, but I may be able to later today.

Mr Marchese: Very good. Thank you, Mr Burns. I'll pass it on to a colleague.

Ms Harrington: I'd like to go back to a comment that was made this morning about calling into question the whole legitimacy of the non-profit program in Ontario. The words "one big scam" were used, and this has to be addressed. My contention, and I certainly hope it is shared by the majority of people in Ontario, is that the non-profit program in Ontario, which has been operating for some time, is a very legitimate part of the housing supply and market in this province. We have the private market, we have rent supplement and we also have the non-profit and co-op sector. These three different areas must work together and interact so that people have that choice.

The whole non-profit sector addresses many different needs, as we've just heard, which are not able to be addressed by the market units or even by rent supplements. Non-profit housing across this province has, in the last 10 years or so, created communities. They have been established by community groups such as Kiwanis, church groups and all kinds of different people who know what the needs in that particular city or small community are and specifically address those needs, whether it's for elderly people, whether it's for French-speaking people, whether it's for people with handicaps. It's more than just housing; it answers the needs, as we've just talked about, but it establishes a relationship between people and builds communities as well.

I'm saying that there are three different parts of the housing market. The majority of people in Ontario believe that answering those needs is a very important part of it. I just want to comment briefly that the Peel Non-Profit Housing Corp, where Ms Marland is from, has been a very important part of that community.

Mrs Marland: They were the leaders in Canada. They started non-profit housing.

Ms Harrington: Excuse me, Ms Marland, I do have the floor.

The Chair: Interjections are out of order.

Mrs Marland: I just thought you might like to know the history.

Ms Harrington: It has been, in the past, Ms Marland's object to promote and lobby on behalf of Peel Non-Profit.

Mrs Marland: That's right.

Ms Harrington: Therefore, one would assume that she does support non-profit, but I believe there are some people, and it may be she, who do not agree with the majority of people in Ontario. Let me just quote you from last July in Hansard.

Mr Tilson: Do you want to have a vote on this? Let's have an election on this.

Ms Harrington: Ms Marland has said that no units were, in this allocation, going to Peel Non-Profit. She went on to say: "This is not right. PNPHC provides 40% of its new units to families needing a deep level of subsidy.... As well, PNPHC has the zonings in place to start building 500 homes immediately. This would have created jobs now, whereas many of the projects are years from construction." So obviously she was lobbying on behalf of non-profit --

Mrs Marland: That's right. That's why I quoted it.

Ms Harrington: -- and therefore was assuming that it is a legitimate part of housing in Ontario and therefore, I put to you, not a big scam.

Mrs Marland: Would you give the date of your quote, please, and where.

Ms Harrington: I'll pass it over to you, Ms Marland. I would like to continue.

Mr Winninger: Are you singing from a different hymn-book today?

Mrs Marland: No, I'm not.

Ms Harrington: Mr Chair, I'm having a problem.

The Chair: We're just going to take five seconds to catch our breath, and then Mrs Harrington has the floor.

Mrs Marland: I'm flattered to be quoted.

Ms Harrington: I assume we agree that non-profit is a legitimate part of our housing program, but the purpose of this committee is now to look at the auditor's report and go from here to see how and where it can be made more cost-efficient and more answerable to the taxpayers of Ontario. That's why we're here, not to call things a big scam.

I would like to ask the deputy if he has had a chance to look into the program review Ms Poole was speaking about yesterday. That is part of the ministry's program to evaluate, over the last two years, how the program has been working and how to improve it in the future.

Mrs Marland: Mr Chairman, I have a point of order.

The Chair: Point of order, Mrs Marland.

Mrs Marland: It's customary, both in the chamber and in committee hearings, that when members are quoted, the date and the reference of that quote are also read into the committee. I would appreciate it if Ms Harrington would please do that.

The Chair: It's not a point of order; it's a request.

Ms Harrington: In answer to your request, it would be July 14, 1992. I don't have the page number but I hope you can find it.

Mrs Marland: Thank you.

Ms Harrington: To return to the deputy, I'd like to ask some specific things, but also I believe there are about 31 different items in the program review. If you would like to highlight some of what you might think would be the most significant of those, the ones I would like to talk about are how the operating budget can be made more cost-efficient by such things as reducing the financing costs. Is there any way we can do that in the future?

Ms Poole: Mr Chair, just on a point of information, I had requested a list of the 30 items. I wonder if that would be available at this time so that while the ministry is answering that question, we could have it in front of us.

The Chair: I was just going to actually make a comment on that. I don't want, in any way, to advise any member on how he or she should ask questions. I would just say that if there are other members of the committee who have already asked a series of questions, then having another member ask our witnesses to answer those questions may cause what has just happened.

Ms Harrington: Okay. I'll go back to my own question, then.

Ms Poole: Mr Chair, sorry, that wasn't the point. I have no problem with Mrs Harrington asking the question. I didn't pursue the questions because I wanted to see the list first and I just wondered if it was available. I think it would be helpful to committee members if we had it in front of us.

Ms Harrington: Hopefully, this afternoon we can go into that further.

The Chair: Mrs Harrington is going to clear that up anyway because she has other questions.

Ms Harrington: Meanwhile, while that is hopefully coming out to us --

Mr Burns: Perhaps, Mr Chair, I --

The Chair: Jump in. Everybody else does.

Ms Harrington: Feel free.

Mr Burns: Perhaps I can shed a little light on the schedule question, Mrs Harrington. The listing of items will be available a little later this afternoon. One of them is taking a new approach to financing and refinancing of the mortgage portfolios associated with non-profits, which is the question Mrs Harrington alluded to. I can comment on that now or later. That's really in your hands.

Ms Harrington: Was that part of the program review?

Mr Burns: Yes. Looking at our financing is one of the items.

Ms Harrington: Maybe we can take that specific question now.

Mr Burns: The second point I want to raise is in response to yesterday's inquiries about the fair-share model, the core need income threshold system and the new approach we're trying to take to assessing market conditions. Mr Nicholas But, who's the manager of our policy group, is here with me. At the appropriate time, Mr Chair, we're ready to present some material on that.

Ms Harrington: We were going to do that, I believe, once the 14 minutes were finished.

The Chair: Were we?

Mrs Marland: We didn't discuss that. Do it in your time.

Ms Harrington: Do I have some time, Mr Chair?

The Chair: About two minutes.

Ms Harrington: Okay. My question, then, is about the way we could make operating costs less in the future. One of those considerations was refinancing or reducing the financing.

Mr Burns: I think I touched yesterday on some reforms that were made two years ago to providing mortgage financing on a cost-effective basis. More recently, what we have looked at is a combination of trying to make the rolling over of mortgages -- by that I mean when a mortgage finishes its term, a new interest rate is fixed for the next term; most of our mortgages are five-year terms -- trying to ensure that this process produces the maximum production. We put some practices in place around that.

More importantly, what we've done is to look at the mortgages held by non-profits and cooperatives that are coming due in the next two or three years, and we've put together an accelerated refinancing package that allows us to take advantage of the quite low interest rates that now exist on the mortgage market, particularly compared to the ones we were experiencing two or three years ago. We're forecasting quite significant savings in each of the next three years through the use of an accelerated refinancing model. So we've looked at a number of different aspects of the way that mortgages are financed and refinanced, looking to lower the operating cost burden that the non-profit sector places on the treasury.

The Chair: That portion of our question time is completed.


Mr Tilson: Mr Chairman, on a point of order: I did ask this question, I believe, on this topic that Mr Burns was going to be proceeding with. What I would prefer that we do, quite frankly, is that we have an opportunity to peruse the material. It may well be that this material will answer some of our questions, and if we have any other questions, that they'd be pursued tomorrow. But at this stage I think it would be in order just to proceed with the usual round of questions.

The Chair: I don't see any objections, so that's what we'll do. Mrs Poole, you have 20 minutes.

Ms Harrington: Excuse me, Mr Chair, I believe that at least our party did want to question the fair-share model. You're saying the other parties do not want to?

Mr Tilson: No, it's not that. Mr Chairman, through you to Ms Harrington, I'm saying that there's been some written material that has been produced to us. I'd like an opportunity to look at it and study it and, if committee members wish to pursue it, that we could pursue that in the session that's being set aside for tomorrow morning.

I haven't had a chance to study it and it may well be that after we've all had a chance to look at it we won't have any questions.

Ms Harrington: Okay. So you're asking our staff person from the ministry to come back at another time then?

Mr Tilson: Tomorrow morning, if we need him.

Ms Harrington: It's just that he happens to be here now and I did want to be respectful for his attending.

Mr Tilson: I appreciate that.

The Chair: Mr Daigeler, I understand you have some questions.

Mr Hans Daigeler (Nepean): Yes. I'd just like to ask a quick question and then pass it on to our Housing critic.

In the auditor's report, and this is really pursuing the matter that was discussed this morning, the auditor says: "In investigating the reason for the relatively better success of the southern region in negotiating competitive prices, we noted they were the only region to use a computerized database to track market construction prices accepted by developers. This database proved to be a valuable negotiating tool when dealing with developers." I would like to know from you whether now the other regions have adopted that database since then, and if not, by when that would be the case.

Mr Burns: I think the southern region's database does represent best practice in that part of our program delivery, and we are moving to have similar systems in place in other regions.

My officials advise me that creating a standard set of numbers to track and putting that in place is part of the program design for the full implementation of the program we're now delivering. The proposal call for that is due in April. The systems and the numbers that we're tracking in the marketplace that you've alluded to have to be in place later on in the spring to work, and that is the goal, so May or June for the whole system.

Mr Daigeler: I must say, as we discussed this morning, I'm also a bit surprised -- well, more than a bit surprised -- that there seemed to be significantly different approaches by various regions of your ministry in how to handle things.

I think there's an attempt in other ministries to move out major decision-making responsibilities to various regions and local sections, I guess, of the ministry. Frankly, on the basis of what I've heard this morning, it makes me wonder whether we're losing some very important controls in that process. Can you set my mind at ease that by regionalizing ministry operations we are not compromising on the necessary central controls?

Mr Burns: The discussion this morning I think focused on the question of whether the general data on projects we were funding, the general data we've been collecting, could easily answer a broad spectrum of policy-oriented questions. Certainly historically it was very hard to do that, but the data we were collecting were data that were necessary, that is, at the centre, for the administrative tracking of the program of projects through stages. We also of course had in place a framework of directives and guidelines around the work of any regional office looking at project proposals and going through all the stages we looked at yesterday.

Projects are subject to a final audit of costs and we have our own internal audit processes in the ministry. There is a whole series of business practices around the management of program delivery out there that is based on the Management Board directives that govern good administration in the ministry generally and on the program design approvals given to us by management boards in the past.

I think I said this in response to a question from Mr Cordiano this morning. We could have, and should have, a management information system that makes it easier for us to get at policy issues and audit issues at the level of whole program. But we do have information in our regional offices, in our files, that's necessary for the good administration and the good delivery of the program.

The Chair: Mrs Poole, please proceed.

Ms Poole: Thank you. We have a variety of opinions on this committee about non-profit housing. It ranges from total support of the program in its present state to total disbanding and abandonment of the program. There's also a middle viewpoint saying that at the time the non-profit program was introduced and built it had a very important need when vacancy rates were extremely low, when our housing stock was in jeopardy because it was not increasing. But regardless of which opinion you have, I think the purpose of this committee is to take a look at the program and make sure it's cost-effective.

One of the things that I feel is that I'm grabbing smoke when I'm trying to find out whether indeed it costs more to deliver the non-profit projects than it would private sector projects of comparable size and quality. If we focus for a moment on the capital expenditure side, I do not feel that the ministry has given me enough information for me to be satisfied that indeed the non-profit sector is producing housing for virtually the same, if not slightly higher, housing costs.

I'm particularly concerned that, other than the land, which has been used as, I think, a very valid rationale for why non-profit housing costs might be higher, I can't get anything beyond that. I'm trying to look at the one area where there has been significant criticism, and that's this middle layer of the development consultants, the real estate agents, the lawyers, the architects, the appraisers and everybody in between, and when I look at that, I have to look at the allegations of conflict of interest. So I'd like to pursue that particular point, because if there are people who are skimming money off the top, if there are people who are feeding money to one of their interest groups, then I think we have to know that, because that's a very important thing.

What I would like to ask you about is, when we're looking at conflict-of-interest guidelines, prior to the auditor's report, did the ministry have conflict-of-interest guidelines in place for non-profit projects?


Mr Burns: I think I've touched on this question a couple of times, including this morning and yesterday. We had what I characterized as conflict-of-interest practices; that is, in practice, we advised people what the appropriate action was, and when questions were raised in any process, we gave consistent advice on what should happen.

We did not have a program condition. Before you even enter the program you have to understand what we mean by conflict-of-interest and ensure that certain steps are taken. We have gone to that step now. In fact, I think I've got the extract from the proposal call. Because of your question this morning, we made copies. We've extracted the conflict-of-interest provisions from the proposal call from December to show exactly what it is that we have laid out.

Ms Poole: Just before we go into what the ministry has put in place, I'm trying to really understand what was in place before. Part of the concern I had was that your answer this morning said you had it in practice but it wasn't a written-down policy. I'm trying to understand. At that time, did you have disclosure, for instance? Was that a requirement for every project, that if there was a conflict, there be disclosure? In practice, was that carried out in every project?

Mr Burns: Certainly, on our records, there are lots of declarations of conflicts. There were some circumstances where we didn't see them. When questions arose from the discussion and it became clear there might be, we asked for them. That was the practice through that period of time.

Ms Poole: I'm trying to ascertain whether in fact the ministry was proactive or whether if somebody happened to declare it, that was the only time it really came to your attention. I think this is quite important, to see whether there was any questioning or investigation of any type, whether the questions were asked when the sponsor group came forward.

Mr Burns: Yes, questions were asked at that time, but as I indicated yesterday, projects would proceed through a number of stages. At the first level, we might just be qualifying a potential sponsoring group and they might not have their full development proposal there, so it might actually be later in the process.

In the case of people using bulk allocations under Homes Now, such as Peel Non-Profit Housing Corp or Cityhome or the Roman Catholic Archdiocese of Toronto, they would be working within a planning framework they were certain of. There were so many hundred units over the number of years. Within that, there might be several different business arrangements they'd be making to deliver particular projects.

At that time of program delivery, the question could arise at a number of different stages in the process. It didn't necessarily arise at once. That's what we've changed. It's now at the very front door. It is a characteristic of the front door now, not something that got talked about as we went along.

Ms Poole: So right now, not only is it written down, not only is it a requirement, but it's initiated at the first stage.

Mr Burns: That's right.

Ms Poole: Would you consider it a conflict, for instance, if the development consultant and the architect were the same person?

Mr Burns: I think the key issue is who is the client and what services are being provided to whom. If a professional architect-designer also had developed a business competence in the general coordination of development and offered that package of services to a non-profit -- that was it, just that package of services -- then that would just be a service contract.

Conflicts have arisen where you would have professionals also associated with and having an equity stake or financial stake of some form in the actual building or development process. Then they have a financial stake in the business as well as some business relationship with the board of the non-profit. That conflict -- it is a conflict -- must be declared. I think the term I used yesterday was that the business consequences of that have to be clear; that is, that some things may be done and some things may not. That's precisely what we've put in black and white now in a guideline that applies to the doorway.

That guideline was not in place at the time the auditor looked at our program, and I think he was quite right to say we should be clear about all this. This is one of the things we've done.

Ms Poole: So this is one of the beneficial results of the auditor's report, that you then became committed to have these conflict-of-interest guidelines in place.

Mr Burns: Absolutely.

Ms Poole: I read this morning from the examples that were omitted from the auditor's report, where you had a development consultant who was also the real estate agent, a director in the construction company building the project, with voting shares, and the property manager for the building, as well as several other projects completed by that non-profit group. Could that type of scenario happen under your new revised guidelines?

Mr Burns: First, there's no question that what you just characterized contains a whole series of very thorny conflicts of interest. The first thing we would have to require is a series of declarations.

My sense, under our guidelines, is that some of those roles you just defined run into each other, and under the current situation, the business practice consequences of that many conflicts would mean you couldn't do that many roles and get in the door of our program. That's too many conflicts in one set of arrangements. Under the guidelines we've just promulgated, the business situation you've just described I don't think is going to happen.

Ms Poole: One of the precepts in a conflict of interest is that somebody should not be gaining out of their position over and above what they were contracted for their professional services. For instance, if you had somebody who was the development consultant, which, as you described this morning, is the project manager, who also carries over into these other areas, they could very well make a decision, not on the viability of the project or cost savings for the project, but they could make a decision on what was going to benefit their other position and the fees charged for that.

Mr Burns: You're absolutely right. That's why I said you have to go beyond the declaration of a conflict to identify its consequences. In the kind of conflict you just identified, the consequence is that that person may not make those decisions.

Ms Poole: Perhaps in the time remaining you could just go over the conflict guidelines you have developed for all new proposals as of December.

Mr Burns: I said that we actually have copies on the way to hand out to you, but I'll walk through its provisions.

Ms Poole: Do committee members want to wait until we have the actual copies?

The Chair: The auditor wants to make a point.

Mr Peters: I think Mrs Marland brought up the point and you brought up the point that this is in a report not reflected in the annual report that was before the committee but was in the final report issued to the ministry. There's some question, of course, raised as to why it is not there.

I'd like to clarify this. Number one, it is not there because this particular conflict you're reading out was not an audit finding. We were aware when we did the ministry audit that it had identified this situation itself and was in fact using that very situation as one of the cases to develop new guidelines on conflict of interest.

Ms Poole: The ministry actually brought it to your attention?

Mr Peters: That's right. Well, we raised it with them.

Mr Peall: Regarding the one situation you're reading from, the very involved one, senior management was aware of that particular conflict, and we had discussed it with them and the kinds of actions that should be taken to avoid that kind of situation in the future. The other five of the 12 that we cited in the report were something they weren't aware of.

Mr Peters: I just wanted to clarify that it's not an omission from our report; it just was not an audit finding. It was a situation that the ministry itself was acting on. In fact, we have reviewed since that time the conflict-of-interest guidelines that I guess the deputy minister will now be referring to, and we found that they dealt in a satisfactory way with this particular situation, and this is why the item did not find itself in the final report.


Ms Poole: What about the five of 12 projects that you reviewed where the development consultant and architect were the same individual or firm? I just wondered why that particular point would not have been in your final audit report.

Mr Peall: Our main point was that we were trying to demonstrate whether these things contributed to higher costs. The whole issue we were making throughout that section was, are we controlling development costs adequately? We couldn't prove from the conflict situations whether they actually added to costs or whether there was any wrongdoing as a result of them. We just pointed them out as a definite risk of doing business this way. We alerted the ministry to them as soon as we realized them and put that in the final report to it as well, to make sure it was dealt with. But because it didn't contribute to our main point -- our main point was really the way they remunerate development consultants -- that's the way we summarized it in the report and chose not to put it in the annual report.

Ms Poole: Because your findings didn't prove or disprove fiscal or financial consequences, you decided to remove that section; also, due to the fact that you felt the ministry was dealing with that particular situation?

Mr Peall: That's correct.

Ms Poole: Okay. Thank you.

Mr Peall: The material will be here in short order.

The Chair: You have about two minutes left.

Ms Poole: Did we want to wait and perhaps pursue that with a further line of questioning, as far as the conflict of interest is concerned, waiting until we have the copies in front of us?

Mr Tilson: Yes.

The Chair: I guess we could do that.

Ms Poole: Let me in the brief time I have pursue --

The Chair: Just one question and one answer.

Ms Poole: Okay. If you go back to the pie charts in the first set of graphs and charts you gave us on Tuesday, you had one called Typical Capital Cost of Non-Profit Housing, Sample Project for Families in Metro Toronto, 1991. In cost per unit, this typical sample showed that construction costs were 65.6%. Do you have any indication of whether this would be in line with what construction costs would be in a comparable private sector building?

Mr Burns: I think we talked a little bit yesterday about the difficulty of making totally direct comparisons, because when we were delivering the non-profit program we went through a rather extraordinary set of changes in the condominium market, which is the principal other market. This isn't a poured concrete apartment building that we're looking at in this particular case.

I think we said before that we do track costs. I think Mr Daigeler alluded to the fairly sophisticated system we have in Hamilton, but of course we have some tracking system in every regional office. We also keep track of the monthly construction price indices that are published dealing with the whole of the residential construction industry. Our view is that the costs and the changes in costs over time in our program were in line with industry conditions and with changes in them.

In some markets we were producing at a lot less than private sector producers, in others they were closer together, but I think that had to do not so much with construction costs but with demand-supply conditions in the ownership market, which got to a rather extraordinary state in 1989.

The Chair: Mr Tilson, 20 minutes.

Mr Tilson: I'd like to proceed with a line of questioning on the subject of consultants. I became interested in this subject when I was first elected to this House. Having sat on a non-profit housing corporation in my riding, I saw how the system worked from another viewpoint. I found it interesting at that time and I find interesting now, the whole process.

When I was first elected, I had a study done for my office. I obtained copies of the starts at that time -- this would be in the spring of 1981 -- and I believe it was 117 starts, and now there's roughly 500, I think, currently.

Mr Burns: Social housing starts in a month?

Mr Tilson: No, no, I had a copy of the current applications that were outstanding. I don't know how many there are now, but it was based over --

Mr Burns: Applications, okay.

Mr Tilson: I had information produced to me of 117 Homes Now projects, and this was in --

Mr Burns: Oh, I see. I'm following you now.

Mr Tilson: I'm giving you this background information on the gist of what I discovered in my report, which was a fairly voluminous thing: It produced all the consultants who had worked on these projects, all the lawyers, everyone who was involved, and it was all set out on the various application forms. The figures I have in this report are obviously substantially different now, because a lot of water has gone over the dam since, but I found some interesting things, and the principles I will be referring to I believe still exist.

Mr Burns: Without wanting to distract you from your line of questioning, this is 1981?

Mr Tilson: No, 1991. It was in the spring, April or May 1991. I discovered that when one talked about legal fees, for example -- there's a section in the forms dealing with anticipated legal fees -- one did not anticipate the cost of OMB hearings. I don't know whether that's changed or not, but it certainly didn't then. The particular development I was involved in did have some OMB hearings; we went to the Ontario Municipal Board. In other words, it went beyond the incorporation, it went beyond the various contracts that one could get into. At that time, from the findings I had, I believe between 15% and 25% of the projects went to OMB hearings for different things, presumably zoning matters.

The other thing I was concerned about at that time and which I am still concerned about is the process of hiring consultants. It's this area I'd like to get into, and I raised it briefly yesterday: the subject of hiring consultants. The group I was with were volunteers from the community. How I became involved? I happened to be an elected official in the town of Orangeville -- I sat on council -- and a number of other councillors were there and there were other volunteers in the community. There were non-profit groups that had church people, as Ms Harrington has put forward, people interested in the housing issue, perhaps qualified in some areas and not in others, but they were basically volunteer people. That's why I got into the topic of consultants and the hiring of consultants yesterday.

I'm not going to name the particular consultant, because the consultant who was doing the job was doing it in an admirable way. I'm looking at the process. My observation was that the consultants were basically to walk through the boards, through projects in various stages of approval and development right to the time they were finished: dealing with the ministry, all the funny forms you've got to fill out -- and I say that with respect, because they are quite voluminous, some of them -- dealing with the developer, dealing with the municipality. A lot of it, in my view, is walked through.

The costs of these consultants show up under the organizational expenses on project budgets and are based, as we have indicated in the past, on a percentage of the capital cost, including the capital cost of the land, which can be substantial, particularly if you have a number of consultants dealing with a whole slew of these projects. They make a lot of money, these people, a lot of money. I don't know if you've ever done a study, but I can tell you, the same names show up over and over, and they make a lot of money, particularly when they get a percentage of these projects.

A definition of what the Ministry of Housing considered an organizational expense was put forward, but at that time, we discovered that $10.6 million of the $23.3 million in fees and charges -- remember, this is back in the spring of 1991 -- was for so-called organizational expenses. That's the consultants, most of it.

The MOH guidelines for organizational expenses, we discovered, were exceeded in 26 applications of the 117 examined, and the ministry appeared to have rolled back 12 of those, although one was actually increased.


Overall, in this study that I did and that's never been refuted -- I don't know whether you personally have seen it, but it's certainly been made available to people in the ministry -- the estimate of organizational expenses agreed with or exceeded the non-profit producers' estimate almost 60% of the time. The point I'm trying to get at is that at that time and, I believe, now, the ministry simply appears to be rubber-stamping many of these organizational estimates as opposed to properly scrutinizing or controlling them.

It gets back to the two areas we were concerned with yesterday. One was the area Ms Poole discussed, and that was conflict of interest, and the other was putting forward a product under proper scrutiny. I am submitting to you that at that time and now there isn't proper scrutiny of these particular areas.

I also mentioned architects, and of course you pointed out that you don't hire architects, but you do have something to do with these consultants. In fact, the ministry provides a list of consultants, as you gave in your comments yesterday, to groups like the one I was in. We don't know who the heck these consultants are. We know darn well we're not going to proceed in these darn things without someone to tell us what to do, how to fill out your forms and how to do a number of other things. We're not going to be allowed to proceed with it.

I'd like you to spend some time on a number of areas. I would like to know how you become a consultant. How do you get there? Who is a consultant? Where do these people come from? I believe a number of them came from the ministry. They're very experienced people. They came from the Ministry of Housing and they're being paid very well, and that's why some of these remarks are being made against the consultants. Again, I'm not going to attack them personally, because it's a system that's been devised, and these people, this government, didn't devise it. This was devised by the Liberals.

I would also like to know, and I'm sure you have figures, the percentage of the consultants who go through the project up until the time there's a shovel in the ground and finish off the project and those who manage it. I'm sure you have figures on that and I would hope that you would produce those to us because, again, that gets into the whole issue of conflict of interest. I would like to know the percentage of the consultants who have a piece of the action, who have interest in -- you must have access to that information.

I would like to know, I suppose, the whole concept of what the qualifications are to be a consultant. You approve these people. I'm willing to bet that 99.9% of the time you tell them whom they should look to. You may not say, "Take that consultant," but you say, "Here are two consultants we would recommend."

I'm telling you, sir, I went through one of these myself. I'm telling you what I experienced at first hand. Maybe the one I was in was a fluke, but I'm telling you, I as a volunteer didn't get paid for that. I sat there. I didn't even know you needed a consultant for these things, but I was told by the ministry officials that you had to have a consultant. I'm sure you'll tell us that obviously it's a process where you had to have one.

We asked for recommendations of consultants and we were given a list. That's why I asked you the question yesterday, and yes, we were given a list. My memory is that we interviewed -- it could have been two; it may have been three. All those names were given to us by the ministry. I'd like to know how those people get on the list that you produce.

Mr Burns: Okay, you've raised a number of important questions, interesting questions. I think I should walk through them in the order that you placed them on the table.

First, are there cases at the beginning of a project when the 1414 form is filled in? If this is what you're alluding to, it's the opening forecast of costs.

Are there cases where the proponent has forecast that there would be no OMB hearing and then there turned out to be one? Yes, and frankly, a significant number of those. You forecast or you estimated that 15% to 25% of non-profit applications end up at the OMB. I don't know what the total number is, but frankly, it wouldn't surprise me if that range was the result. That does produce some extra costs at the soft cost end, not just in consultants but often in interest costs.

Mr Tilson: Ironically, if I could just interject, the consultants get a percentage of all of that. When you have all these legal costs, the consultants get a piece of the action.

Mr Burns: I'm going to return to that in a second, because you asked me that later.

Mr Tilson: Yes, I'm sorry. I shouldn't interject, you're quite right.

Mr Burns: Frankly, I'd personally much prefer a discussion to this kind of formal stuff, but that's the format we're in. So there are soft costs associated with longer processes than anyone forecast at the beginning or expected to happen, and lawyers are only a part of that; interest costs are also a significant part of it.

There is a forecast in the 1414 for the organizational expense and, as I've said a couple of times, the 2% general guideline is something derived from an analysis done by the government of Canada in a Canada-provincial context 15 years ago. The practice of the ministry has moved from one of a more general acceptance of a guideline-based system, which we were just discussing, to one that's based on a clear definition of the services to be provided and the fees associated and a fee-for-service approach, if you like, which is more in line with what you would have from an engineer or a lawyer in a particular case. Our costs in this line are now running at 1.4% of capital costs, not 2%.

You alluded to the sample that you looked at and indicated that in a number of those projects the organizational expense exceeded the 2% and that we had rolled back a number of them, which is true. But we'd also accepted a number of them, because there are cases where there are difficult community development problems, either of the type that you alluded to, a difficult planning approval process and a board hearing, or ones associated with the nature of the community you're dealing with. If you have a small project and you're trying to create a housing situation for people with special needs, you often need to put more organizational effort into the front end.

Mr Tilson: Can I just stop you at that point and talk about the personal experience that I had?

Mr Burns: Sure.

Mr Tilson: The particular group that I was involved in did get involved in a zoning application which went through the municipality and went off to the OMB. You talked about the consultant being obliged to go through that process, and you're right. What does the board know? They don't know anything about these things. So the consultant did go through that, but in addition to that, there was a lawyer who had carriage of the action, who acted for the municipality. The corporation hired a hot-shot law firm from Toronto, an excellent lawyer who was experienced in zoning and was well-qualified and extremely well-paid, I might add, who didn't even have carriage of the action, was there really on a watching brief and was advised to be there by the consultant; we needed an independent person.

The point I'm getting to is that the consultant's role continued to be a walk-through, because throughout the entire process we had all these experts we were paying vast amounts of money for. I don't want to give you the figures because I could be challenged on them, but they were substantial. I'm thinking specifically of the legal costs to go to this OMB hearing on a proceeding in which the lawyer did not even have carriage of the action; yes, the consultant was there but had very little to do with it. It's just that it's a concern I have. You say a consultant had additional matters to get involved in. Yes, the process was going through, but we hired people to look after us on those issues.


Mr Burns: Well, boards have to make these judgements. They take advice from their advisers. I don't know what the nature of your OMB --

Mr Tilson: Well, in this case it was from the consultant.

Mr Burns: Right, but I don't know what your OMB hearing issues were. But certainly there were other people who have gotten into the same situation you're describing --

Mr Tilson: Oh, I'm sure. I'm sure ours is minor compared to some of them.

Mr Burns: -- and took the same actions.

I didn't mean to suggest that a development consultant or a project manager would do the work of a lawyer or an architect, but rather, for example, if the object is to try to create a housing situation for people who had formerly been in psychiatric institutions, then you have to do work with support service agencies. There are other things involved in creating the project than are involved in a more conventional, straightforward family project. That's what I was really alluding to.

Our requirement, and we touched on this yesterday when we were looking at the stages in a project's development, is that a non-profit group who wish to create a housing project have to demonstrate that they've gotten together a competent team. In most cases in Ontario, that means hiring a general project manager, usually called a development consultant. That's not always the case. In fact, it's been touched on before that there are people in the architectural profession and in other parts of this who will do this work, and in the larger municipalities, community groups sometimes use the resources of the municipality. I know that in Peel, Peel Non-Profit has done development work for community groups in Peel. That's true in Toronto and in Ottawa. So there are some places where people don't rely on what we've been calling here "development consultants."

Mr Tilson: Before you leave, because I don't know what time we've got -- how much time do we have?

The Chair: A couple of minutes.

Mr Tilson: I do want some sort of commitment from you, sir, before you finish, and I know you could go on for some length on this, because I've asked you --

Mr Burns: I'm almost done.

Mr Tilson: But the point that I was concerned with, particularly when we know we're going to be talking about conflict of interest again, and since you have indicated that your ministry is concerned with that topic --

Mr Burns: Yes.

Mr Tilson: -- I assume that you have statistics of the consultants who have worked in all the projects from 1986 on or whatever and what those consultants have done; in other words, whether they're architects or whether they own a piece of the development company or whether they do this or do that, or what they manage. I assume you have lists of that and I would appreciate that.

I would also like in the final minute for you to tell me: What is a consultant? How do you get to be one? How can I get to be one? I'd love to be one. I'd make all kinds of money.

Mr Marchese: You can be. I'll come with you.

Mr Tilson: I'm sure you would. We could set up a team.

Mr Burns: Get all the bases covered.

You asked about whether we knew how many situations there were where a company was offering project management and also property management and stayed with the project after opening. That information is in our files, but we've never extracted that particular set of data or had any report on it. It would require a significant amount of research, but the information is there.

The question of conflicts and whether, as conflict declarations are made and exist in our files, they show any pattern -- whether a particular company has got more than another -- again, that would require us to search all of our files, but we keep track, obviously, of those declarations and they are in our material.

I think I said yesterday that this is not a regulated industry or a licensed industry. It's not like architecture or engineering.

Mr Tilson: They are being paid a lot of money, Mr Burns. They really are.

Mr Burns: Project management in the real estate industry --

The Chair: Twenty minutes. I'm sorry; we're out of time. Ms Harrington.

Ms Harrington: I'd like to first come back to the question that we discussed a bit this morning, and that was with regard to ensuring that the selection process for the projects is a very fair and open process.

Just to back up for a minute, it's our responsibility, as has been noted by my colleagues opposite, to make sure that there is proper scrutiny, to make sure that it is a fair process and to make sure that non-profit housing is very cost-efficient. Some time ago, when this government was elected, we looked at the system that was in place at that time. I think it's very fair to say that there were some loose ends. I think it was messy in some places. There were no operating agreements is one example.

We took the job very seriously, the responsibility and scrutiny to tighten up the process, to make changes, and what we need to hear from you this afternoon, Mr Deputy Minister, is what are some of those changes that have been made, because the process was not perfect. It still is not perfect, but what are the changes that have been made?

I want to ask you first of all to assure me that this process of selection of the allocations, selection of the groups, is a very fair and open process. I want to know what changes have been made in the last while.

One of the other questions I see as very important in the future is that the auditor has emphasized the needs and demands studies to make sure that in the future the allocations go to where they're needed, so I'd like you to also address the needs studies and where and what you think they should be in the future.

Mr Burns: We touched on some of these subjects this morning when you asked a related question.

Ms Harrington: I'd just like to summarize it and conclude whether or not that process is a very fair and open process.

Mr Burns: You asked a related question. I gave a general answer this morning, but I think I'll touch more specifically on the proposal call that we issued in November 1992, the first proposal call under the program announced last spring. In response to a question from Ms Poole, I indicated that, for example, it contained explicit instructions on the conflict-of-interest matter, but I didn't touch on some of the other aspects of it.

Yesterday, we looked at the opening stages of the allocation process that's used in the federal-provincial program. It was used in large measure in the provincial programs that were the subject of the audit, and they are initiated by people submitting proposals in response to a general call. Those proposal calls were relatively general, and the first stage of information to be submitted can be characterized as preliminary.

What we've now said to people is, "We want to be very clear about what it is we're after; we want to be very clear about what it is you're required to do to qualify; we want to be very clear about the evaluation criteria that will be applied to your application; we want to be very clear about the standard practices we expect," in respect to not just conflict of interest, which we talked about, but contamination, which we've also talked about. We also provided, I think I've said before, some public information rounds. We also provided a clear, simple appeal process.

In this particular case, people who applied got an evaluation. They got a written response telling them exactly where they stood in relation to the program requirements and they had an opportunity to have a dialogue and an appeal. That resulted in far more certainty among groups that are considering applying than existed under the previous system, just to give you a sense, and certainly if any member of the committee does not have the proposal call we issued in November, we'd be happy to provide them with it.

We provided a context in the openers, which talked about the program, about the policy objectives that the program had as a result of the Consultation Counts process -- you alluded to that before -- and described the nature of this proposal call. We indicated what format material should be in the submission. We indicated what to do if they needed extra information or had to make inquiries, exactly how to do that. We committed ourselves to a specific, concrete time schedule. We gave clear deadlines and we made it crystal clear to people exactly how the evaluation process would work.


In the appendices or the backup at the back of the paper, we went beyond saying, "_ou must deal with conflict of interest," or, "You must deal with contamination," by providing chapter and verse of what we meant by that, and, "What would be an adequate response if your project had any apprehension of contamination or conflict-of-interest situation?"

We asked people for evidence that they were a body corporate, obviously, what their mission statement was for a management plan, and for a profile of their clients to deal with conflict of interest, to deal with contamination. We asked them to deal with their land situation. Do they own it? Do they option it? Are they dealing with someone who's made a proposal? Are they also wanting to provide services beyond the physical building? What project management and other professionals had they retained?

We indicated that by applying they had to show to us, by board resolution, that they understood the program policy framework and were prepared to adhere to it in the future processing of their application, and a whole series of other items of that character.

Ms Harrington: Can I conclude that there would be absolutely no room for what would be called favouritism in the press?

Mr Burns: I'm not sure what people all mean by favouritism, but let me answer it the other way around. We provided a system with clear parameters and in every case an applicant got a written response saying, "This was the assessment," had an opportunity to challenge that with the person who made the assessment and appeal it if he had reservations about it, and have a review done by someone else.

This is a far more demanding and rigorous process than the one that we described before that applied to the programs we were dealing with earlier. I was asked yesterday about the character of those allocation processes and I said they proceeded from a framework and went through a number of steps. Those steps were well understood, but they were not accompanied by the level of rigour or specificity we have introduced in this proposal call.

Mr Peters: As a supplementary, you were kind enough to quote our concern about the needs and demands analysis, and in the document you were just referring to there is a geographic allocation outlined on page 7 which, for example, says that the central region shall get 1,086 units, the eastern region 262 etc. As I said, these targets will provide a basis for distribution. I'm just wondering if I could ask, as a supplementary, what sort of analysis went into these numbers in order to determine the target of, say, 1,086 units for the central region or 206 units for southwestern.

Ms Harrington: My question to the deputy minister was, what changes are being made in that whole process of needs and demands studies and what is your ideal down the road and are we going to get there?

Mr Burns: Mrs Harrington asked two questions, the second one of which was very close to the question you just asked, so let me answer them all at once.

Mr Peters: Oh, I thought you were through with that one.

Mr Burns: No, I was through only with talking about the character of the proposal call. I was catching my breath for a second. It says right in our document, on page 7 in the preamble to that chart you were just referring to: "The new allocation model intended to be used for Jobs Ontario Homes is in the design stage. Therefore, the following regional targets have been established using the fair share allocation model." These 2,000 units, the opening doorway, this regional allocation was done using the traditional federal-provincial model.

Mr But was here a little earlier with some material that Mr Tilson referred to before which was going to be, and is in fact, a walk-through of the design work we are doing to create a different regional planning model, a made-in-Ontario planning model, from the one we've been using, the federal model. The federal model, as rooted in a concept that's felicitously called CNITs, core need --

Mr Tilson: That's not "snitch"?

Mr Burns: No, CNITs, core need income thresholds. Essentially, it's a planning model derived from a statistical analysis that's intended to demonstrate housing need, so it's a needs-driven planning system. What we think makes some sense is not just to use that kind of data but to balance that with some -- we have 16 regions in Ontario as a result of our work with 16 planning regions. They don't totally overlap with what would be a logical definition of "housing markets," at least in my view.

In addition to using core need as a concept, we're trying to look at logical housing market areas, and within those to look at waiting lists and the character of waiting lists to look at the underlying growth rate. It's one thing to be dealing with a region that's experiencing decline in population; it's another to deal with a region experiencing population growth. That feeds into looking at the character of occupancy in the current rental stock in the community. Is there vacancy? How is that distributed across the stock? Is that a long-term phenomenon or a short-term one?

We're looking to a methodology that will look at more aspects of housing market conditions in a housing market and rely less on this needs-based planning system that all the non-profit programs in Canada have been using for somewhere between 10 and 15 years. The kinds of things that we're getting at and the way we're getting at them are summarized in the material that Mr But handed out and that he was willing to present and would be willing to present whenever the committee might wish that.

Ms Harrington: Hopefully, we will get to that tomorrow.

The Chair: Mr Marchese also wanted --

Ms Harrington: Could I make one concluding statement and turn it over to Mr Marchese?

The Chair: Sure. Yes, go ahead.

Ms Harrington: With regard to the studies and where allocations will go, I feel in the future it's very important to work with municipalities and get them involved in it. I know in Niagara Falls there has been a lot of discussion in the past week or two about the need or lack of need for non-profit. They really don't know where to turn for really accurate statistics on the need. One thing they haven't even thought of is that in Niagara, we have the highest number of people paying more than 50% of their income for rent. The highest number of people with that kind of problem are in St Catharines, Niagara, because we have so many people out of work, and yet there are vacancies, but this is also a fact.

I think we have to work very much more closely, have the provincial level and the municipal level examine what's really happening in their municipalities and plan for the future, not just the downturn in the next six months or something but look long-range. I'm really hoping that needs will stimulate a more integral look at the community to see what's needed.

Mr Burns: I think this is an important point. A number of municipalities have done quite good assessments of their local housing conditions and created housing strategies within their own official plan, many in response to the Planning Act statement on housing policy issued in 1987-88 and financially supported by the Ministry of Housing over a number of years. In some cases, that's very helpful to the kind of exercise we're talking about here. In other cases it hasn't been quite as helpful, partly because you have municipalities that aren't the real market and partly because they've only, for their own logical reasons, looked locally at parts of the housing market picture.

We are doing some work looking at housing market conditions now, and while we are doing that, we are doing that in dialogue with the local municipalities whose jurisdiction is the community we're looking at.

Mr Marchese: Mr Burns, in my community we have a lot of Cityhome projects, non-profit and cooperative homes. One of the typical problems we have in all these projects is that we have a lot of electrical costs, space-heating through electricity. In some cases, the electricity costs are so high that they put a tremendous burden on the project or the tenant, depending on the arrangement.

Mrs Marland: Jack Layton could afford it in his Cityhome project.

Mr Pat Hayes (Essex-Kent): A little order here, Mr Chairman.

The Chair: Order, please.


Mr Marchese: The difficulty with all of this is that this is a horrific legacy that some of our colleagues on the other side have left us with many years ago. But what have we done? In some cases, some of these tenants would say, "We're not even in the room" or "We haven't been in our place for a month and put down the electricity to a very low level and we still pay inordinate amounts of dollars on electricity." Have we done anything to help those people? That's my first question on this issue.

Mrs Marland: They haven't been in it for a month because they're in Florida.

Mr Marchese: I can't believe you would say that, Margaret.


Mr Marchese: God's blessings, Peter. I'm sorry. Mr Burns, go ahead.

Mr Kormos: Mr Chair, on a point: Could you please ask Mr Marchese to be quiet because I can't hear Ms Marland. Oh, I'm sorry. Did Mr Marchese have the floor? I'm sorry.

The Chair: We're going to give Mr Marchese some added time.

Mr Marchese: Thank you, Mr Chair.

Mr Burns: There are a couple of things I'd like to say about this in particular. Your first utility costs, as a cost of doing business, are another one of the items in the list of 30 basic program cost areas that we're looking at that Ms Poole asked about earlier in addition to refinancing, which we've already touched on.

Through a lot of the late 1980s a great deal of social housing stock was built with electric heat. There was a marketing push on for electricity at the time but, perhaps more importantly, construction costs bumped up against the MUP. It really forced people to trade off capital costs to operating costs. They had to minimize their capital costs and they were willing to make capital investments that resulted in higher operating costs, and the utility area is one of the clearest areas where that happened. A generation of buildings got built with electric heat, and we all know what's happened to electrical rates.

That practice has been stopped as of -- I guess it's getting close to two years ago now. Wherever feasible, gas is to be provided as the energy source in a building, not electricity. That did result in a bit of a capital cost bump. I think I alluded to that when I was talking about what happened in early 1991, One thing that happened is the introduction of the GST. Another thing that happened is that the then Minister of Housing said, "We're not doing this any more," and that did bump capital costs in some projects. It lowered operating cost but bumped the capital cost.

So the first thing we've done is on a broad basis, where there's energy alternative to electricity, which is most sites, we're not having electrically heated buildings.

Second, this year or next, we have a two-year pilot program running in the whole social housing sector to look at replacing electrical heat with appropriate alternatives. Its acronym is SHERP, social housing energy reduction program. In that program, we're not just doing some of the obvious and conventional things like putting in high-efficiency gas furnaces where there were old oil ones or taking electric heat out of town houses and that kind of thing. We're actually experimenting with some more dramatic forms of technical change.

The toughest stock to get at is the stock you just touched on: high-rises fitted with electrical heat. They don't have duct work. They don't have pipe work. How do you switch to a different heating system? We're doing some frankly technical experimentation in high-rises to see whether we can't get gas-based systems, even hot-water-based systems, retrofitted in a cost-effective way in a high-rise context, all in pursuit of tackling another substantial area of operating cost within the social housing sector, utility costs or energy costs.

SHERP is intended of course not just to directly reduce costs in the buildings that it's tackling but to provide a base of technical work and business practice that we can use in the future when people want to tender retrofits, who want to look at technological alternatives, who will have a body of knowledge in the Ontario Housing Corp and in the cooperatives and non-profits about how to do that.

Third, we have strongly encouraged people to join bulk-purchase pools where they're using gas. The big operators, where they have a large stock -- and certainly Cityhome is one of them -- switched to bulk direct purchase of gas from the west some time ago at considerable savings. But if you're a church group or a community group and you only have one project or two and you're on the gas system, it's a little hard to get at that purchase system. So we've been working with the social housing operators to try to find ways to get more people into bulk-purchase arrangements where they're using gas as their energy source, again much more efficient purchasing, much more cost-effective.

The fourth aspect of this is a tough one and you just touched on it. What happens in those electrically heated buildings that either we haven't retrofitted or can't when you have high costs, when you have bulk metering -- you don't have individual metering -- and you lock that into the income situation that a lot of social housing tenants face, fixed incomes or social assistance incomes with fixed utility components?

That is a very thorny problem because you get real estate issues, social assistance adminstration issues and energy conservation issues all running into each other. Frankly, there's no magic answer to that one and what people have been trying to do is tackle the issue on a building-by-building basis.

The Chair: That's it.

Mr Marchese: I'll come back.

Mr Cordiano: I want to return to a statement, Mr Burns, that you made I believe yesterday at some point. I wasn't clear as to what the intent was behind this statement, but you said something like this: Costs for maintenance and upkeep in the non-profit sector are higher than in the private sector.

Mr Burns: Yes, they are.

Mr Cordiano: I have a hard time understanding why that would be. What's your explanation for that? What can you point to to tell me that maintenance costs and upkeep would be higher in those buildings?

Mr Burns: Ms Poole asked me this question yesterday.

Mr Cordiano: She did?

Mr Burns: Yes, she did.

Mr Cordiano: She followed up on this?

Mr Burns: No, she raised it yesterday and you're now asking for some elaboration of it, which I will give.

The two costs she pointed to directly were administration and maintenance. On the administration side, we require non-profit, cooperative and public housing landlords to incur significant administration costs because of the program administration requirements we lay on them. They have to run tenant intake and placement systems. They have to assess people's incomes. They have to reassess them every year. There are a series of administrative practices they must follow that go beyond what any private landlord would have to do.

Mr Cordiano: I recall that part of it.

Mr Burns: On the maintenance side, we spend more money per unit on maintenance in a general way than is spent in the private sector per unit per year. Partly I think that's because these are public services and people expect a consistent high standard, and that perspective or approach, a consistent high standard, is what is built into budgeting and program delivery on the maintenance side of things.

In some cases the social housing providers operate with older buildings and with a tenant population that creates significant wear and tear on the building. We have a high proportion of young children in a lot of social housing projects and they simply wear things out, as they ought to and certainly as mine do. That has to be dealt with, and that's another characteristic of the situation.


Just let me go on for a couple of seconds. I also said -- this is also reflected in the auditor's report -- that the distribution of costs for these items among social housing producers shows quite a lot of variation. We believe that's something that's got to be looked at intently. It is in fact one of the other items in the list of 30 that Ms Poole asked about earlier.

We are working right now on a project called norms and standards, where we're looking at basic subelements of the operation of a building, at norms in the social housing sector, at norms in the private sector, to create some benchmarks against which, at the minimum, we can ask questions. There may be reasons for diversion from benchmarks, as there are on the utilities side, but we don't have a commonly accepted base of norms and standards for subcategories of operating costs in the social housing sector at large, not just non-profit and co-op.

Mr Cordiano: Let me make this comment. There are, in the non-profit model, quite a number of units that are operated on a co-op basis. They're not just simply supportive or social housing.

Mr Burns: Yes.

Mr Cordiano: That implies that residents would be part of the overall maintenance of a building, sharing in the administration and undertaking all of that. It's very difficult for us to sit here and for me personally to understand how the operation of these units would be more expensive if a co-op model is working the way it was envisaged.

Mr Burns: I didn't distinguish among parts of this, but the co-op sector, in the evaluations that have been done nationally and the data we've looked at here, consistently shows the lowest administration and maintenance cost for exactly the reason you just identified, that is, there is a contribution made by the residents, and that has an impact on the rent charges or whatever they're called, housing charges. The co-ops are the lowest-cost operators, public housing is the highest-cost operator and the municipals and privates are in between.

Mr Cordiano: I'm sorry, but we're talking about the whole non-profit sector, assisted housing, the construction of new units that are coming on board. When we're talking about that, I imagine your figures are average figures, weighted for all of those together. Unless you can tell me that the weighted averages -- I don't believe this to be the case. At least in the initial part of the program when we started it, the disproportionate numbers were to co-op housing.

Mr Burns: No. I don't know what you mean by proportions. I can tell you absolutely --

Mr Cordiano: Yes, let's get to the absolute numbers.

Mr Burns: The proportion of the non-profit program that is non-profit cooperative under Homes Now is somewhere between 15% and 18%.

Mr Cordiano: Everything that you're bringing on stream now?

Mr Burns: I'm sorry, I'm just going to go on. On the 10,000-unit program -- the end of Homes Now, and the 10,000-unit program is what's in the system right now -- that program is 38% or 39% co-op, from my memory. The program goals for the new program are that -- this is expressed in bands -- in a general way, the program contemplates one third cooperative non-profits, one third municipal and one third private non-profits. Looking back at Homes Now, which is the main program that was the subject of the audit, that program is somewhere between 15% and 18% non-profit cooperatives, about one third municipal non-profits and about 60% private non-profits.

Mr Cordiano: What's a third municipal non-profit? Is that assisted housing, supportive housing, in a sense? Would that fall under that category or would it fall in the private non-profit?

Mr Burns: Most of the housing that would be called supportive housing or housing for people with special needs is provided by private non-profits, but there is some in the municipal sector. By the municipal sector, I'm referring to organizations like Peel Non-Profit, City Living in Ottawa, the Metropolitan Toronto Housing Authority, the York Regional Housing Authority and Nepean Housing Corp. Many of those companies make some provision for supportive housing -- that is, housing with services directly attached -- and all of them make significant provision for people with physical disabilities. That's part of their program.

Mr Cordiano: So the bulk of what's being built now is in effect, and has been for the last number of years, supportive housing which basically falls under both categories, municipal and the private.

Mr Burns: A substantial proportion has been supportive, but in fact the largest portion of the private non-profits is not supportive housing but housing sponsored by groups such as the Roman Catholic Archdiocese of Toronto, the Presbyterian Church, local community service clubs, the Knights of Columbus, organizations rooted in immigrant communities, the Columbus Centre, just to name a building you probably know. Those kinds of groups are all captured by the rubric of "private non-profits."

Mr Cordiano: That brings me to the next point that I have. With respect to the $1.2 billion in operating costs projected for 1995, what is the target mix that is being used to calculate that figure for 1995 with respect to the rent-geared-to-income?

Mr Burns: The bulk of that is in projects that either exist or are under way now, so their target plans are known. The additions in terms of new commitments will come from the residual of the federal-provincial program, which, as you saw in yesterday's slide, is down to a few hundred units a year. The remainder of the program we've been touching on here is the Jobs Ontario housing program.

Mr Cordiano: The auditor points out, if I may just try and help you out, because we're going to run out of time here, that the average income mix in the sample that was used, 30 projects, puts the rent-geared-to-income proportion at close to 75%. That is getting significantly higher than the amounts that were stated originally with a view to integrating these buildings. That's a point I was trying to make earlier. The concern I have is that if you're using a lower figure than, say, the 75% the auditor is using or looking at, which is the average that is figured in the 30 projects we looked at a sample, your estimates or projections about what operating costs might be in the year 1995 are too low. In fact, you'll have much higher costs.

Mr Burns: The 75% rent-geared-to-income is the experience of recent federal-provincial program delivery and of Homes Now taken together. It's, as I said yesterday, not 100% households in poverty, but banded so that there is deep-core band and a moderate-income band and a market band. Those proportions are what has been used in our forecasting model for costs in the middle part of the decade.

Mr Cordiano: I suggest to you, then, that the estimates and projections you have are incorrect and the amount that is going to be required to be budgeted for in those operational years is underestimated. That is a fact of life, perhaps, that's the reality, but we have to understand that and I think that has to be reflected accurately, because we simply are dealing with a case of operating budgets which are going to explode in 1995, 1996, 1997 and onward. We're not talking about a program that's relatively inexpensive; we're talking in the hundreds of millions of dollars.

Mr Burns: Expenditure forecasting, like most kinds of social science and economic forecasting, is not an exact science.


Mr Cordiano: Perhaps not in government circles, but it's got to be more exact these days, because we are facing difficulties.

Mr Burns: It is as exact as you can make it. I think what you do is subject it to some tests of sensitivity. How much would it swing if some of your key assumptions changed? Our actual expenditures, compared to the forecasts we were making two or three years ago, are significantly down, and that's a combination of the cost restraint exercises we're going through and the benefit that we've been getting from a change in interest rates and construction costs. If you went back and looked at what we were forecasting a couple of years ago about expenditures now and next year, you'll find we're down considerably from that. Now, am I going to sit here and pledge my first-born child to what conditions will be like in 1996? No, and I don't think anyone else will either, but we do test our hypotheses when we make these forecasts.

Mr Cordiano: I don't know how much of my time we have left, Mr Chairman.

The Chair: You have until 3:47.

Mr Cordiano: I'm going to allow some time for Mr Daigeler. Again, going back to the points I made earlier, it's not a case of using one model for economic forecasting versus another. I think basically what we're talking about is not having a real understanding of what we're dealing with. It's simply not possible to even make an accurate assessment and for us to be reasonably assured that we're on target. We're making this up as we go along, and the kind of projections that are being talked about here are absolutely scary.

On a philosophical level, I'm supportive of the non-profit sector, but when people look at this program and it's getting out of hand the way it has and costs are uncontrollable, and in fact in a recession, in a downturn in the economy, we don't see efficiencies being made and we still don't see the benefits of the downturn in the economy resulting from the program, then it causes grave concern on the part of members, at least on the opposition benches. I know in my party we supported this program when we were a government, and we still do, but the fact of the matter is that we have to get some control over what's going on.

With respect to the projections that are being made, it is scary in terms of the amount of dollars that will be spent in the subsequent years of this decade. So we have to get a better handle on it, we have to become more precise and we have to have an accounting procedure, as I said, which everyone can understand and everyone can point a finger at as to the viability or the economic efficiency that's being undertaken here.

Mr Burns: I know we're close to the end of this, but let me just say two simple things in response to that question. First, I want to emphasize how seriously we're taking the question of tackling costs. We just touched on some of the elements we're looking at. We are tackling our cost structure. Secondly, in the last couple of years, our forecasts have been very accurate on the operating side.

Mr Daigeler: The auditor pointed out that the operating costs vary significantly between and across the regions of your ministry. Why is that? More specifically, why are the operating costs so much higher in Toronto? I'm not talking about the capital costs; I guess some time ago, this could be understandable. But why is there such a tremendous variance across the regions and specifically, why so high in Toronto?

Mr Burns: The single most important reason is that the capital costs for projects in the Toronto area are significantly higher than capital costs in the rest of the province, and that rolls over into operating costs.

Mr Daigeler: How is that? How do the capital costs roll over into the operating costs?

Mr Burns: If you have one building that cost $100,000 a unit to build and one that cost $50,000 a unit to build, then the operating budget of one is considerably smaller than the other. The operating budget is made up of rents and our transfer payment, so our transfer payment is smaller if the capital costs are lower. The single most important reason why administrative costs in Toronto are different from the rest of the province is the capital costs.

The Chair: It's basically to carry the mortgage. That's the big difference?

Mr Burns: Yes, the mortgage payment costs are higher because the cost of creating a building is higher. Secondarily, many of the other cost elements in the operation of real estate or housing have been higher-priced, more expensive, in Toronto than they have been in a lot of other communities, and that flows through to operating costs. Third, in the mix, there's a higher proportion of our social housing stock in Metro Toronto that is supportive housing that's dealing with a tenant population that has needs beyond ordinary tenancy and there are extra costs at the centre of those organizations. Those are the three most important reasons why there's a variance between Toronto and smaller communities in the province.

Mr Daigeler: I don't know whether it is permissible, but I'm wondering, if these are such obvious reasons, and it seemed to relate to some standard policies, why the auditor would put so much emphasis on this variance problem. I don't know whether the auditor might want to respond to this.

The Chair: We just happen to have him here. Maybe you could repeat your question, Mr Daigeler.

Mr Daigeler: Yes. If the answer is so apparently simple, why did you put so much emphasis in your report on the variance across regions, and specifically in the Toronto figures, on the operating side?

Mr Peall: In Toronto we did have some comparable data that we could get, so we did want to at least compare what projects we saw in Toronto with that. We also did want to show the regional variation, and in doing that I should point out that we did exclude all special-needs projects from our sample to make sure that it was a relatively comparable sample. We thought we would exclude anything that should have extraordinarily high costs, and the costs you see in that schedule exclude most capital costs, so we're not talking about mortgages, utilities and taxes. Those costs are largely uncontrollable once the unit is built. We're just talking about the labour and related, the administrative, those kinds of things, and that's why we felt that variation needed to be justified.

The Chair: That's a good point. We'll have to follow up on it in the next round, Mr Daigeler. Mrs Marland, 20 minutes.

Mrs Marland: Mr Chairman, I really believe that when we're discussing non-profit housing there are some things that we're losing sight of here. I used very strong language this morning when I said that the current non-profit housing program in this province is a scam. I want to explain why I really believe that, and why I agree with the statements that addressed the concerns, not of the Conservative Party or the Liberal Party or the New Democratic Party; the auditor's report expresses the concerns of the auditor, who is responsible for the expenditure of the public dollar in this province.

There is a member of this committee who lives in a co-op housing project, and when I have discussed with that member how that member feels about living in a co-op housing project when that member earns in excess of $71,000 a year, the answer I get is, "Well, you know, my costs are not subsidized."

The point is that all of these projects, any of these forms of public housing, are totally subsidized in the capital cost of the building by the public taxpayer, and we'd better not lose sight of that. When I joked earlier about perhaps Jack Layton could help out with the example that Mr Marchese was giving, I meant that.

The point is, we have examples all over this province where the wrong people are living in non-profit programs, and on one of the pages of the auditor's report he actually expresses concern about who is there. On page 126 he says, "However, multiple waiting lists and inconsistent placement criteria and referral practices make it unlikely that those in need of affordable housing will be treated consistently, equitably and efficiently."

We did touch slightly on this subject about who gets the money for all of these programs. We were talking two weeks ago about the family benefits allowance and the general welfare allowance and the fact that we've got a Somalian warlord's family on general welfare allowance. I don't know whether it's actually GWA or FBA. That's all under investigation, and that's happening today in this province.


That's happening in a building that I have had brought to my attention, which happens to be an Ontario Housing building, where there happen to be Mercedes and Jaguars in the underground parking garage. What I'm simply saying is that it becomes a scam when you have these abuses. It becomes a scam when public money isn't going to the people who need it most.

Frankly, I think "non-profit" is a huge misnomer. I think whether we're talking about housing or child care or long-term health care, when we talk about non-profit, what it really means is that it's no profit for the taxpayer. The taxpayer is losing.

It was interesting earlier this afternoon that Ms Harrington referred to the fact that I spoke last July in support of Peel Non-Profit Housing Inc receiving a bigger share of the pie in terms of the allocation of units in this province. You bet your boots I would speak in favour of it. If these units are going to be allocated by this socialist government under a non-profit housing program, the best non-profit housing program in the country is run by Peel Non-Profit Housing. They were the originators of non-profit housing in Canada, and I sat on their board as a regional councillor in the late 1970s. I know how they operate. I know how their particular selection criteria work.

What I'm saying in that reference Ms Harrington made is that as long as this government is giving out these units, I would rather they went where I know they are well managed. What I want to say --

Ms Harrington: A point of clarification?

Mrs Marland: I purposely didn't interrupt you this morning or earlier this afternoon.

The Vice-Chair: On a point of order, Ms Harrington.

Ms Harrington: Point of clarification, Mr Chair: I would like to ask whether, if a member is lobbying for the non-profit housing, therefore that would indicate a support for non-profit housing.

The Vice-Chair: I'm sorry. That's not a point of order.

Mrs Marland: I think, in fairness, I purposely didn't interrupt you when you spoke earlier this afternoon. I would suggest to you that I would like to debate some time, anywhere in this province, on a public platform, the expenditure of $2,400 a month for a bachelor apartment in Toronto at the same time that you could open any one of the Toronto daily newspapers and find bachelor apartment vacancies in Toronto at a rent of $400 to $450 a month.

This was an example I brought up in the House last year. How can this government say it's okay to subsidize these units between $2,000 and $2,400 a month when you could go out and rent in the marketplace the same accommodation for $400 to $450 a month? This is where the word "scam" applies, because you're trying to be, oh, all so altruistic and pure and perfect, and you're looking after the needy people. I say to you, you're not looking after the needy people.

When the auditor addresses some of the terrible discrepancies that have been addressed in his report, it confirms not from a political perspective but from the auditor's office that some of what we are saying is true. Frankly, if you want to spend $2,400 a month, then do it and look after four or five bachelors in the marketplace rents that are available today in this Metropolitan area of two million people in Toronto.

I just feel that for the government to be saying that -- the answers that the deputy minister has been giving today really give me even graver cause for concern. I think this morning when the deputy minister said "Well, of course, it depends on the design of the audit as to what figures we use" -- isn't this wonderful? In other words, if the design of the audit fits a certain form, then the deputy minister maybe can provide the kinds of figures that are needed.

I find it horrifying to think that we've got this auditor's report -- incidentally, issued in December 1992, about five months after I was still believing that the non-profit corporation units for Peel might work -- when I see this auditor's report in this form, I also have a copy here of probably 50-odd pages that never even got into the final report. These were draft comments that have pretty scary stuff in them. This draft report doesn't even get into the private report that goes public. This happened to have been leaked, otherwise we wouldn't have it and we have an auditor sitting here saying, as he said this morning, "Actual costs were simply not available." I go back to what I said this morning: It's not good enough that the auditor has to say, "Actual costs were simply not available."

What are we saying here? We're saying, "Oh, we're providing affordable housing." But what I'm saying to you is that by 1995 when you're spending $1 billion annually in a subsidy, then you'd better be answering the questions and the concerns the auditor has brought up.

As the spokesperson not only for Housing in our caucus but also for people with disabilities, I have a tremendous concern when he says he feels that, "Placement criteria and referral practices make it unlikely that those in need" are "treated consistently, equitably and efficiently." That's a very major statement.

I think it's also a major statement when they say that 25% of the projects they reviewed -- the auditor, not the PC party -- lacked approved operating budgets, "25%...lacked approved operating budgets, either because budgets and audited financial statement information had been filed late, or because the ministry had not yet reviewed them." I want to know what the ministry's role is in supervising these non-profit programs.

Mr Chair, when the auditor also says, "Controllable operating costs such as labour and administration were high, particularly in central region," is this a non-profit program?

Ms Harrington: On a point of order, Mr Chair: I'd like at this point for the member to clarify. She has made some statements within the last three to four minutes questioning --

Mr Tilson: She's reading out of the auditor's report.

Ms Harrington: Excuse me --

The Vice-Chair: Order.

Ms Harrington: The member actually questioned the auditor's right to be independent, I believe. She questioned the parts that were left out of the auditor's report. She also questions the figures the auditor chose in fact to use. I'd like her to clarify.

The Vice-Chair: I'm sorry. I believe this not to be a point of order and I will have to revert back to Mrs Marland. Please continue.

Mrs Marland: Mr Chair, I want to confirm that I am reading from the December 1992 auditor's report. I'm not reading from any political party's propaganda. I'm reading from an arm's-length report from the auditor, who is responsible, as I said a few minutes ago, to the public of this province whose money is funding this program that is not addressing the needs of the people.

If it was, you wouldn't house one person at $2,400 a month; you would house four or five individuals. You wouldn't subsidize a two-bedroom apartment at $2,300 a month -- and I can give you examples of those in Toronto -- when you can go out and rent in the private sector a luxury condominium with a Jacuzzi and whatever else you wish, recreational facilities, everything else in the building, for between $800 and $900 a month.

Ms Harrington: Excuse me, Mrs Marland, I was questioning your right to question the auditor's report --

The Vice-Chair: Order. Mrs Marland has the floor.

Mrs Marland: Mr Chairman, I think it's totally unfair of this member to keep interrupting me. She will have her turn when the rotation comes around to her. I will deal with this matter while I have the floor, if you do not mind.

Also, I think some of the other scary comments in the auditor's report, such as, "Despite a significant decline" -- decline, I emphasize -- "in land prices and construction costs after 1989, the cost of projects approved for go-ahead in 1990 and 1991 continued to increase."

This is the way this Ministry of Housing does business. On the outside they want to say to everybody, "Oh, we're looking after everybody in need." Well, the people the Progressive Conservative Party are concerned about are still, in the thousands, on waiting lists.

We are concerned about the frail elderly, the disabled and the people who do need help with housing and we are concerned about the fact that the money is being spent in an extravagant, unmanaged way that is not addressing the needs of the numbers of people who require that kind of shelter help. They need shelter supplements. They need direct help to help them today. They don't want to be added to more and more waiting lists, and that's exactly what is happening.


I'd like to ask the deputy minister, first of all, by 1995 -- I suppose you agree with the $1-billion annual subsidy that the auditor has referred to -- how many of those units at that time will be occupied by the frail elderly, single parents and handicapped? Based on your answers this morning, you probably don't even have those figures for today.

The point is, when you talk about deep subsidy, shallow subsidy and core needy, to the public they're all words. The public, who can't afford their taxes today because of the deficits this government is bringing into this province every year it's in office, don't understand those terms. The public want to know why people earning in excess of $75,000 a year live in any kind of subsidized unit.

I'm asking you if you feel proud of the record, and how many people, in terms of actual numbers, directly need the supplement to their income because they can't afford their housing, particularly in those categories I've mentioned, the frail elderly, the handicapped and single parents.

Mr Burns: The forecast of total operating cost requirement in the middle part of the decade you alluded to is one that's consistent with our forecasting.

Mrs Marland: Which is what?

Mr Burns: A billion dollars in the year you mentioned.

Mrs Marland: So you agree with that?

Mr Burns: I agree with that.

Second, at that point, the universe, if you like, of non-profit and non-profit cooperative housing will be about 120,000 units.

In that universe we expect -- this has to be a forecast, because as I said earlier, there's a difference between knowing how many units have been specifically designed for people with some physical challenge and the number actually housed. As you well know, having been on non-profits, sometimes they end up in conventional units.

Mrs Marland: Aren't you making that a requirement?

Mr Burns: It's a requirement that a proportion of units be provided in the whole program and in every project, but that's physical design. In fact, most social housing landlords house more people than just in some specific design.

Having said that, the 120,000 units, which is today's universe, are about 20% occupied by people with physical disabilities or the frail elderly. The universe in the middle part of the decade will be about 175,000 units, and the proportion that's occupied by the subgroups we're now discussing here, in my estimation, will be roughly the same, so 20% of that universe.

Mrs Marland: You're saying that for the cost of $1 billion annually in 1995, 20% of those units will be occupied by single parents, frail elderly and the disabled.

Mr Burns: No, not single parents.

Mrs Marland: Well, that was my question.

Mr Burns: I'm sorry. The frail elderly and the physically disabled were the ones I focused on. I don't have an estimate for the proportion that'll be single parents, but as you well know, that's a fairly high proportion of the deep core family households. We'll take a shot at a specific estimate, but it shouldn't be much larger than the number we're just now talking about.

Mrs Marland: Do you know what those figures are today in those three categories?

Mr Burns: They are what I said for the frail elderly and the disabled. The proportion of households that are single parents we don't know for certain, but we can make a reasonable estimate, based on our experience.

Mrs Marland: And what is the reasonable estimate?

Mr Burns: I can't answer that right this minute. I don't have it in front of me.

Mrs Marland: So you don't know today what your housing is in those three categories?

Mr Burns: I do for the physically disabled and the frail elderly, because they have special characteristics that we would identify as they come in. But a single-parent family is just a family household eligible for geared-to-income arrangements, and we wouldn't necessarily know in every case whether there's one adult or two. As you know, you have to be careful about information you collect in these situations because of the strictures put on information collection by the Human Rights Code.

Mrs Marland: When you talk about 20% of those units today being for people with disabilities and the frail elderly, how do you feel about that from the standpoint that we're talking about providing housing for people in the greatest need and yet we're talking about only 20% being in that category? When you look at some of the comments the auditor has made, doesn't it give you a lot of concern that somebody outside of your ministry --

The Vice-Chair: You have one minute left. I just wanted to warn you.

Mrs Marland: -- that someone outside of your ministry has come into your ministry and concluded, in his words, that, "It's unlikely that those most in need of affordable housing will be treated consistently, equitably and efficiently." How does it make you feel that what your government is saying it is doing, according to the Provincial Auditor, is not happening today?

The Vice-Chair: A very brief answer.

Mr Burns: I'm not sure, Mrs Marland, that this is a forum in which I should express my feelings about any particular part of the issue, but let me say on the question of access --

Mrs Marland: Well, are you proud?

The Vice-Chair: I think at that point we're going to move on.

Mr Burns: I think my oath of office excluded all emotional dimensions to these questions, but I would like to talk about access.

The Vice-Chair: You're not compelled to disclose your personal feelings.

I'm going to move on to the government members, whose time it now is to have the floor.

Mr Marchese: Mr Burns, if you can confirm these statistics -- I don't think it's a political question; if it is, you can just tell me. There's a figure here that I wanted to confirm. From the figures I've seen, 61% of all vacant two-bedroom units are priced above $800 a month. Is that a figure you have seen anywhere that you can confirm?

Mr Burns: Is this for the province or for Metro?

Mr Marchese: The province.

Mr Burns: Frankly, it's not a number I've seen, so I can't comment from my experience on whether it's valid or not.

Mr Marchese: Okay. I just thought it would be useful if you could confirm it, otherwise somebody might say I'm inventing this figure.

Mr Burns: I will ask staff to look at the number, but I'm not acquainted with it.

Mr Marchese: There's another figure I wanted to raise, and if somebody could substantiate it, it would be great: 88% of all vacant two-bedroom units are priced over $700. Does anybody know?

Mrs Marland: Probably not.

Mr Marchese: That's not fair, Margaret. Now, calm down. I'm sure they have it.

Mrs Marland: Well, let's see.

Mr Burns: I have just been handed the October 1992 rental market survey data for the Toronto census metropolitan area; the source is CMHC's regular rental housing market survey. So this is not the province; it's Toronto census metropolitan area that I'm looking at.

This one says 62.9% of the vacant units are $700 or above and 38.9% are $800 or above. That's for all vacant units, so that would include bachelors and one-, two- and three-bedrooms. That, in my estimation, is reasonably consistent with what you said, that two-bedrooms would likely be slightly higher than this. That's looking at the Toronto CMA, but I don't have provincial data in front of me.


Mr Marchese: It would have been useful to have gotten an Ontario picture. I thought it was.

Mr Burns: It may be; I don't know.

Mr Marchese: If it is, the point is that what is available is inaccessible to the people Mrs Marland refers to as being the most needy, and that's an important point. So the question is, how do we address the needs of the needy? It isn't by simply saying that there are lots of vacant places and just fit those people in, because you can't; they can't afford it.

Mrs Marland: They have vacant disabled units in non-profit housing in this province.

Mr Marchese: I want to get back to the question that Mrs Marland raised about how we look after the needy, because that's her concern and it is equally mine. The statement she made is that the taxpayer is losing through this housing project that we're engaged in, through non-profit housing cooperatives and the like.

My argument is that the taxpayer is not losing, that if we follow the reasoning of Mrs Marland and presumably Mr Tilson, if we look at the logic of what they were suggesting earlier, that through shelter allowances or rental supplements we might be taking care of these people who are the most needy, we would in fact be doing the taxpayer a total disservice, because we would be doing several things: We would not be providing housing, which would mean the entire industry would collapse and all the spinoffs that come as the result of that --

Mr Tilson: They should start building apartments again; let's start doing it.

Mr Marchese: Let's start doing it.

Mr Tilson: Well, they won't as long as you keep on with this policy. Why should a landlord get into all this?


Mr Marchese: I want to answer that. I don't mind the interruption.


Mr Marchese: Where is the Chair?


The Chair: Order.

Mr Marchese: Order has been re-established. Thank you, Mr Chair.

Mr Tilson raises an interesting point. He says they would be building if we just changed our policies. Well, in British Columbia, they've done what Mr Tilson is suggesting, and the private sector isn't building. I presume he might say that it could be for a variety of reasons. I don't know what they might be. But they have done exactly what he suggests since 1983 -- or 1973, I forget which; 1983, I think. But nothing has changed and the private sector isn't building. He's suggesting that if you undo some of the things the NDP is doing, things will start all over again.


The Chair: Order. Mr Marchese, we have witnesses here to answer all of your questions. Mr Tilson would like to answer all of your questions, but --

Mr Marchese: I realize that; you're so right. I was doing what Mrs Marland does. I did what Mr Cordiano was doing and then what Mrs Marland was doing.

The Chair: Mr Tilson's always pleased to help, but we have others who are going to help.

Mr Marchese: Thank you, Mr Chair. I understand what you're saying.

The Chair: Both Mr Tilson and Mrs Marland are always pleased to help, but Mr Burns is here to give you help.

Mr Marchese: Oh, absolutely; I agree. That's why I asked him a question.

Ms Poole: Why don't you answer?

Mr Burns: I didn't have the information to answer.

Mr Marchese: He did answer the first question.

Ms Harrington: Are you finished?

Mr Marchese: I'm almost finished. I'll defer to my colleague in a moment.

The Chair: Ms Harrington's been waiting.

Mr Marchese: I know, but she'll wait until I finish. So on the vacancies part, we're establishing that the majority of vacancies are inaccessible to the most needy, point 1, Mrs Marland. Remember that; perhaps you might come back with something else. I'd like to hear it.

Point 2 is that the answer is not rental supplements or shelter allowances, because that's the worst thing you could do to the taxpayer in terms of where the dollars are spent. You're saying, "We're spending over $2 billion now in shelter allowance; let's spend a little more." If that's what you're saying, Mrs Marland, you're doing your taxpayers in Peel a complete disservice.

I wanted to make the point to you that through this integrated approach to housing, providing non-profit and cooperative housing, we're doing the taxpayer a service through the construction industry and the spinoffs and also suitability programs for those who really need it, through, I should add, Mrs Marland, an integrated approach of income distribution. You fail to understand, when you make reference to Jack Layton --

Mrs Marland: Income distribution if you earn over $75,000 --

Mr Marchese: She's doing it again.

The Chair: Order, please. That's what you get when you mention Jack Layton. You should never have mentioned his name.

Mrs Marland: Earning over $75,000 a year and living in a co-op housing building? Give me a break.

Ms Harrington: She's totally out of order.

The Chair: She's out of order. I'm going to add two minutes to Mr Marchese's time.

Mr Marchese: So the point is that that is the healthiest thing you could --

Mrs Marland: I'm talking to the --

Mr Marchese: But you were talking to me too. Don't you want to talk to me any more, Margaret?

Mrs Marland: He added two minutes. Don't talk to me.

Mr Marchese: All right. Mr Chair, I think Mrs Marland has gotten the gist of my point, so I will now defer to my colleague Ms Harrington. Thank you, Margaret.

The Chair: Ms Harrington, you have until 4:30.

Ms Harrington: I'd like to take some time this afternoon to look ahead to the program review this ministry is undertaking, possibly to have the deputy minister distribute that and relate it to the auditor's report, because there are some very new and different directions we are taking, some of them certainly in line with some of the recommendations the auditor has made. Some are very different, such as the native consultations we have been doing and specifically targeting allocations to the aboriginal community, 2,000 units; that allocations call or proposal call will be going out within the next few months, and a whole new design of a program is now being worked on after consultation with the aboriginal people of this province.

I'd like, if all the members have been able to get a copy of this, to ask the deputy to highlight some of what he thinks are the more substantial changes in direction that we are taking. I know my colleague Mr Winninger wanted to ask some questions about this, so I'll ask the deputy to refer to it.

Mr Burns: Suzanne Herbert is handing out the summary list of areas that we're looking at in the program review of expenditures, which is one question you touched on. The second question you touched on was the new program and some of the program design questions we're looking at and how they may depart from past practice.

I think I'll start with the second one. I touched earlier on the nature of the proposal call documents and our objective of providing clarity, certainty and a real indication of what we expect as good business practice in the proposal call. That's one key change in design.

We've also gone on to try and specially design a couple of components to the broad program in a different way. The government, as a matter of policy, has indicated that it wishes 2,000 units of this program to be delivered to aboriginal communities. In that case, within the broad rubric of the program, we are doing an intensive consultation with aboriginal community organizations, obviously focusing on the ones that have some housing activity now, but including the broad spectrum of aboriginal organizations, to try to find a way to create a program delivery system that meets their needs, that's suitable to their institutions and can still operate within the framework of clarity and good business practice that we've established for the whole program.

Similar discussion is under way in relation to supportive housing. Many members of the committee will know that in past practice it's been tough, on a community basis, to tie together support service funding and housing funding when your object is to try and provide both services to one particular community of people. So we are in this area as well looking at what needs to be done to try and tie together our program delivery and the funding that's needed to support service activity from other organizations.

I think one of the interesting things we've tried to do with both those subprocesses and the main one is that we've tried to do the program design in a reasonably open way; that is, we've sat down with a lot of the players in the non-profit and cooperative world to look at issues of program design, what their reaction is to some of our notions about clarity, certainty, timetables. We've sat down with the professions, sat down with the architects, sat down with the cooperative and non-profit providers; we've sat down with a group of people who are private builders but who do a lot of building in this particular sector and sought their perspective on our program design all the way through the process.

So even for the main program design, not just for the subcomponents that focus on special, particular, identified policy objectives, we've tried to do our program design in an open and consultative way.


Ms Harrington: What would you say are some of the main features of this change in direction that you've put before us?

Mr Burns: I've touched on the ones that have to do with clarity and business practice and with explicitly building in the policy objectives. What I haven't done is to touch on those elements that are explicitly drawn from Consultation Counts, the broad consultation on the nature of the program and its reflection in the new program design. If you'll give me about 20 seconds, to be sure I don't misspeak myself.

Four broad objectives for this program lead to different design elements and will lead, eventually, to different operational elements. One is the notion that program design and delivery is, in some respects, a partnership, and that's what's led to the more open design process that I just touched on before. Secondly, we are requiring, in the new program, a higher level of resident involvement in every aspect of the operation of community non-profits. Third, we are requiring -- and I touched on this before but perhaps it's brought together better in this list -- people to adhere to common access practices on a community basis.

Ms Harrington: Good.

Mr Burns: Fourth, we've specifically organized ourselves to design the program to respond to communities where there are service needs as well as housing needs, and we just touched on some of those.

Ms Harrington: When you say "service needs," does that mean you're going to be working with other ministries directly?

Mr Burns: At this level at Queen's Park, in terms of broad program design, yes, but we're also going to be more active at the community level, drawing together the housing providers and the service agencies and trying to reduce the disjointed quality of funding arrangements that now exist in a lot of these service areas.

I can now go on and talk about the more specific components, if you are interested in going beyond the broader thematic issues.

Ms Harrington: Yes.

Mr Burns: Obviously, the new program responds to the broad commentary that was heard when the consultation process went on, that those involved in the production and management of non-profit housing wanted some time horizon that they could work with. The kind of stop-start, small program and awkward deadline processes of the past were difficult to work with, created inefficiencies and were difficult to plan with. So this program is intended to have a defined, understood, rollout timetable that people could relate to and organize their own work around.

Second, in addition to establishing that resident participation is a required element of the program, we obviously have to go beyond that and talk about best practice, how you do this and provide training information and support to that kind of activity throughout the sector.

Third, we have to look at the things we need to do to make sure that the public sector is strong in the long term. As we've all been commenting here today, it's grown quickly in the last few years: a lot of new organizations, new boards, new staff. There has to be a significant effort mounted to provide training and education opportunities to boards, staff and residents as individuals and organizations to provide a strong base for the sector in the long term.

Fourth, we should try to do our program delivery and spending in the context of some understanding of housing issues on a community basis. That connects to the discussion we were having before about replacing the fair-share model with a perspective and model that's more rooted in local conditions.

Fifth, funding support for the non-profit and non-profit cooperative sectors is a fundamental building block of the housing supply strategy.

Sixth, we should look at overhauling our relationship with operating non-profits and cooperatives so that we replace what is, in many cases, a system of incredible attention to blades of grass and not enough attention to lawns with a system that focuses on the right issues so that norms and standards become a key element, not penny-by-penny reviews; that operating agreements provide incentives for good management practices and efficient operation; and that we accept that there is a partnership dimension to the design, operation and delivery of the programs.

The program also will emphasize innovation in financing and planning and provide an incentive to people to find experimental and innovative ways to tackle those problems in a cost-effective manner.

Next, this obviously takes place in the context of municipal work, municipal plans. You alluded to this earlier. It is one of the specific elements of the objectives of the new program that it take full account of local planning and development strategies.

Finally, it should touch on, as an objective, the connection of the program to the environmental objectives and social justice objectives of the government.

Ms Harrington: What do you mean by "social justice objectives"?

Mr Burns: It comes back again to the points you raised at the beginning, that particular parts of the program are targeted, for example, to aboriginal communities and another part to individuals and communities with special needs.

Those are broad themes and some specific policy objectives. We have, as a result, some operational requirements in the ministry that we will have to achieve as well. They include a more open way of doing our business; to be consistent and clear on the accountability structures that apply in the program; to do a great deal more education; to be clear about what our principal interest and objectives are in both the development and operational phases; to tackle some of the questions of consistency that have been raised in Consultation Counts and in the audit and, again, in the non-profit review, using best practices throughout the province so we can derive them from local work -- we talked a little bit about the Hamilton experience in tracking real market costs and using that kind of approach -- to create a more formal and open cycle of feedback and evaluation of our practices and activities; to expand and make much more effective the dialogue the ministry has at the level of communities with municipalities and various players in the housing and real estate industries; and, I guess in parallel to that, and touching again on something we mentioned before in relation to individuals and communities with special needs and the aboriginal community, to redefine and rework some of our program practices so we work more effectively with other ministries here at Queen's Park.


Ms Harrington: Mr Winninger has a question for you.

Mr Winninger: Is there time, Mr Chair?

The Chair: Only if it's very brief.

Mr Winninger: On page 6 of your Consultation Counts discussion paper, one of the policy objectives set out there was to "develop programs that promote a high degree of independent decision-making by not-for-profit housing providers" in the communities and, at the same time, "within a framework of accountability and good management of public funds." Now, I expect that there might be some tension between maintaining, at the provincial level, accountability and good management of public funds and allowing a certain degree of autonomy at the local level for independent decision-making.

I wonder if you could comment perhaps on a hypothetical example where a not-for-profit group is very desirous of obtaining a certain parcel of land and the developer says, "Well, if it's going to take a year to get commitment, I want an interest charge to carry this property for a year until you get commitment for a not-for-profit complex or I'll just go ahead and develop it privately," and the not-for-profit housing provider says, "Well, that sounds reasonable to us; we really want this parcel of land and we really want to get on with our project."

At the provincial level, I suppose, that kind of arrangement between the housing provider and the developer may not seem to be within the --

The Chair: Order, please. I'm sorry; the time has expired. You had a chance for a question.

Mr Winninger: I'll continue it later.

The Chair: Yes, I think you should continue it later. Mr Cordiano, 10 minutes.

Mr Cordiano: Actually, Ms Poole has a statement to make.

Ms Poole: I just wanted to say I have a number of questions on the document you handed out, the Non-Profit Housing Program Expenditure Review, but I think in view of the fact that we're now going to 10-minute intervals, Mr Cordiano may as well ask his questions and I'll address this tomorrow, if that's acceptable.

Mr Burns: Fine.

Mr Cordiano: There are several concerns that I have with respect to the document Consultation Counts, and it obviously will deal with the new day, shall we say, and what's to happen in the future. One of them deals with the new approach that is being called for in this document with respect to allocations. I'll just read from the document to express my concern with the direction that's stated here.

"The Ministry of Housing's current fair-share allocation model is largely a top-down approach which allocates the units across 16 planning regions by client group.... However, an allocation process that is too centralized lacks flexibility and sensitivity to local market conditions," and so on.

It goes on: "As a result, the Ministry of Housing will be working with the housing advisory committee to design an allocation and project selection process for Jobs Ontario Homes which will be based more on community need and demand information, adding a bottom-up project selection component."

That's all fine and good, but when the auditor put forward his concerns with respect to selection and approval of housing proposals, the ministry response at that time had this to say: "The government has decided to adopt the strategy of providing a buffer against another affordable rental housing shortage like that experienced in the mid-1980s by continuing to create more affordable rental housing units."

Those two statements are irreconcilable, as far as I'm concerned, or at least contradictory. If it's a bottom-up approach that is going to be used, how do you justify that in fact you're going to build a buffer, not knowing what demands will be in localized markets? Or in fact do you know what demands are going to be in those local markets and you're going to be able to create that buffer? I see the two things as totally incompatible. If it's a bottom-up approach that you're going to undertake, how does that square with the need to build a buffer, which is still a centralized process?

I have another concern before you get into an answer, if you don't mind, because I won't get it on the record, and if I don't get a response today perhaps we can deal with it tomorrow. Following on that, further on in this document, on page 29, the ministry, under the housing framework and principles set out in the housing framework, is moving towards an annual transfer payment mechanism -- it is what's stated here -- rather than a budgetary review process. It goes on to say, "In addition, incentives should be built in to encourage cost-efficiency and to minimize the subsidy required from the ministry."

I have a great deal of concern with that direction. If we're going to move to an annual transfer payment mechanism, I think we're asking for big trouble on the horizon. We already have a number of transfer payment recipients, a number of transfer payment agencies, that deal with the government and the auditor has a great deal of difficulty doing audits that are value for money, because he doesn't have the authority to go into transfer payment recipients' books to do that kind of auditing, and we simply can't get to the bottom of their expenditures.

In addition to that, there's less control, if you're moving in that direction to that kind of system, than there is in reviewing budgets in advance. So I have a great deal of concern with the direction the ministry intends to move in, in this regard. I think it means less accountability and less control over how much is spent, and we already have a problem with spiralling costs. I think this can only lead to more spiralling costs and out-of-control budgeting processes. I don't know if there's enough time for an answer, Mr Chair.

The Chair: There's time for an answer.

Mr Burns: On the first question, I don't believe there is an inconsistency in devising a program planning framework based on using some broad needs indicators provincially and also on community market assessments. The reference or allusion to a buffer as a metaphor in the letter simply indicates that when you look at local conditions beyond what comes out of a CNITs formula, you have to look at, for example, underlying growth rates. We have some communities that haven't grown in 20 years. We have others that continue to experience demographic growth where the question of housing supply generally has to be addressed. That's what's meant in the letter, that there are communities where housing supply generally needs addressing.

There won't be a perfect match. If your observation is that there is not a perfect match between a totally needs-based system and a community-market-based system, that's correct; there'll have to be some reconciliation of those things. But I think that's a far more effective way of tackling planning of allocation of resources than the CNITs model has been historically.

On the question of budget relationships, let me just say a couple of things about the current system, and this system has been in place, frankly, for 50 years and applies to public housing as well as to non-profit and co-op housing. When a budget is settled, if it's underspent, if you're efficient in your operation and you spend $200,000 less than the agreed budget at the beginning, then the ministry takes all of it back. It doesn't matter whether you're the West Kenora local housing authority or the Nepean municipal non-profit. Not surprisingly, this evokes a particular kind of behaviour in people managing budgets at the local level: They spend to budget.

In the public sector, spending to budget has been a kind of norm. The consequences --

Mr Cordiano: That's because budgets are set too high, obviously.


Mr Burns: I'm not going to comment on that particular proposition, but let me just say that when the allusion to incentives was there, I'm quite interested, the ministry's quite interested, in looking at whether we can create an incentive-based budget process to replace the one we've got. We may in fact be interested in trying it in public housing as well as in non-profits and cooperatives.

If the Columbus Centre is efficient, in the year it is efficient it can retain that, and then we roll over and talk about what may happen in the year after. We get away from incremental budgeting based just on some historical-based budget that may have been set years before. That's what's meant by saying we want to look at incentive structures. I think they are an important part of trying to capture the attention and commitment of local boards and managers to cost-effectiveness.

Mr Cordiano: I have no difficulty or quarrel with an incentive-based budgeting system. In fact, I would support that wholeheartedly. The only concern I have is that the document says there "should be" built-in incentives. It should read, "There will be incentives built in," rather than "should be," because you haven't decided that yet, obviously.

Mr Burns: We're working on it now. I'm personally confident we can create such a system, but it is not without its problems. On the question of transfer payments --

The Chair: I think we're going to have to move on. I'm sorry about that and I apologize. Mr Tilson.

Mr Tilson: I'm referring also to the booklet, Consultation Counts, and what appears to be the new adventure the government is proceeding in, that is, Jobs Ontario, which seems to apply to everything these days. On page 23, the government talks about:

"Jobs Ontario Homes is a three-year, 20,000-unit, non-profit and cooperative housing program. These 20,000 homes represent a total investment of about $2.1 billion in the construction industry that will generate an estimated 33,600 jobs."

Then it goes on for another paragraph, which is great socialist stuff and that's fine and dandy. The difficulty we have is the policy of saying, "We're going to construct 20,000 units no matter what." That's the policy. I think it was Ms Gigantes who stood up and it was in the budget and I think Mr Cooke has stood up and said, "We're going to build so many units and that's that, and we're going to fulfil those units."

The question I have to you is, why wouldn't one go the other way, look at specific communities and say, "This is what these communities need"? You may not need 20,000 units. It's great to say, "We're going to build buildings to create jobs." That's wonderful political stuff, but the question is, looking at specific areas, the effect it's going to have on the existing buildings, the effect it's going to have on the existing structure, the effect it's going to have on the government, the government's going broke now trying to figure out how to finance all its policies.

Why wouldn't you recommend to the government that perhaps you should go the other way, that extensive work should be put aside and you should say, "Do we need these housing units in these particular areas?" as opposed to saying, "Thou shalt fulfil and build 20,000 units no matter what"?

Mr Burns: Half of your question had to do with broad choices of public policy and I think the minister is the most appropriate person to address those.

Mr Tilson: She won't come to see us. That's the problem. You're the only one I have, Mr Deputy Minister, because the minister won't come here. I'm not asking you to defend the policy, because you do have the ability, as the deputy minister, to say, "It would be more economical not to say that we're going to fulfil these 20,000 units" -- or whatever units you're going to have -- "but we're going to do analyses in particular areas." Otherwise, it's going to be who gets there first with the application.

Mr Burns: That is the part of your commentary and question I think I really should respond to, because it builds on some of the discussion we've had earlier today about how we will be doing our planning for program delivery and reflecting local conditions. I think I said yesterday that there are some communities where we won't be accepting applications. There are communities where we didn't accept applications. There are communities where we didn't accept applications in December.

Mr Tilson: The booklet does get into talk about allocations. I understand that, that you may reject certain applications. But rather than saying, "We're going to build 20,000 units," we're going to say, "This is the need." There may be a need for 100,000 units.

Mr Burns: Just on a needs-based model, the CNITs methodology that's been used nationally for 15 years actually concludes that from the needs-based perspective of program design, the needs have been rising in Ontario for the last two or three years. That said, we've also said a number of times here, and I'll just repeat it, a CNITs type of needs-based model is not all that you should really have to do a really good program design and delivery, in our view, so we are supplementing it with community-based assessments, as I touched on before. Some of that methodology is contained in the material that we handed out just after lunch.

Mr Tilson: Where's all this CNITs stuff? Where is this? Where can I find that? I don't know anything about CNITs. Where do I find that? This word has cropped up today. I love new words.

Mr Burns: It's core need income thresholds. It's a measure of housing need that's used nationally. It's CMHC's methodology for establishing a universal housing need in a particular province. It looks at a bunch of factors.

Mrs Marland: Is that an acronym you're using? What's it for?

Mr Burns: Yes.

Mrs Marland: What is it?

Mr Burns: Core need income thresholds, which in the business is called, rather unfortunately, CNITs. The CNITs methodology suggests the number of households we have an unmet need of in Ontario.

Mr Kormos: How many?

Mr Burns: There are 280,000 households.

Mr Kormos: Is that the need?

Mrs Marland: No. The core need according to the figures you gave out today is 264,250.

Mr Burns: Then you have it. I was rounding. That's using the federal methodology. That's one ingredient in trying to assess how to design some program delivery.

Mrs Marland: Do you use something that the feds use?

Mr Burns: That's it.

Mr Tilson: We don't have a Chair. I'll just proceed. Mr Burns, I have a question on the subject of a question that was raised by Mr Cordiano this morning, and that had to do with the subject of guarantees. In other words, you go to get a mortgage or a non-profit housing corporation goes and gets a mortgage, and through the various agreements, the government guarantees that. Mr Cordiano asked how much those guarantees mean to the Ministry of Housing? You did not answer that question. I'd like that, because that is a liability to the province of Ontario for several reasons.

One, as you know, these mortgages will expire and it will be necessary to refinance and it may well be, for example, that the value of the buildings has slipped down below the value of the mortgages, in which case the corporation is in a lot of trouble, or worse yet, as you've indicated, examples where corporations go down the tubes. Who's going to cover all this stuff?

Mr Cordiano's question is a legitimate question; it's a good question. I think we're entitled to know exactly the amount of money that the province of Ontario is into as far as honouring potential guarantees is concerned.

Mr Burns: All our forecasts suggest that it is very little. We've had very little experience of default.

Mr Tilson: I don't want to know your forecast.

The Chair: Will you please answer the question, Mr Burns, because we're running out of time. I'm trying to get your answer in.

Mr Burns: I was answering the question. I'll try this another way. We've had little past real experience of default or of financial collapse in the social housing sector. The mortgages on the social housing sector at the moment are secured by the real estate they are attached to.

Mr Tilson: Let me rephrase the question. Can you tell me the amount of mortgages that are out there in the system?

Mr Burns: Yes. In round numbers about $7 billion in residential mortgages sit on social housing, on the non-profit co-op housing sector in Ontario.

Mrs Marland: About $7 billion?

Mr Burns: About $7 billion, of which a little over $3 billion is Homes Now.


The Chair: Okay, the government members have 10 minutes. I have numerous requests from members. Mr Duignan, then Mr Hayes and then, if we have time, Mr Winninger.

Mr Duignan: My colleague Mr Winninger had started a question, so I'll allow him to finish it and maybe then he'll pass it back.

Mr Winninger: In turn, I'll allow my colleague time to ask his question.

Mr Burns, now that you've had a chance to think about and ponder the first part of my question, I suppose what I'm asking you is this: The initiatives that are being taken to devolve decision-making power to the housing providers in the community seem to me to be a very favourable step to take. I guess what I'm asking you is, at the same time that you devolve decision-making power to the community, how are you able to retain the kind of control and accountability that the taxpayers of Ontario will demand from the Housing ministry?

Mr Burns: On both sides of the equation -- that's on the development side and on the operating side -- the objective is to be crystal clear about expectations, about norms, about standards. I've talked a little bit about how we've reflected that in the proposal call. I've talked a little bit about the establishment of norms and standards on the operating side that are rooted in real world experience and have some acceptance by people who operate in the sector. I've talked about what I believe to be the value of moving towards a more incentive-based budgeting system, which by definition implies that people have some ability to manage among budget lines, which right now we make quite difficult by the way we regulate budgets.

On the development side, though -- and we've talked about this quite a lot in the last two days -- there are several different ways to move from a chunk of land to an occupied building in business practice terms: the hypothetical situation you've talked about before, which is really a negotiation about a form of an option. There are a dozen ways to skin a real estate option. Our requirement is that the land price produced by that transaction be consistent with the program. That's really what we're after. We're after the maximum amount of clarity about what those things mean, so that people have some certainty about the environment they're operating in.

Mr Duignan: I just want to spend a little time talking about -- I think we may have touched on it on the last couple of days -- the subsidies paid. Let's concentrate, for example, on the co-op sector. There are two subsidies paid, the RGI subsidy and the bridge subsidy. Maybe you could explain a little how that works and the fact that I think it's roughly year two that bridge subsidies withdraw at the rate of about 5% a year to a certain point, and at that certain point the co-op begins to repay some of that bridge subsidy back to the province. I wonder if maybe you could walk us through that scenario.

Mr Burns: I'll try to use a very simple model to explain the subsidy flow. In a hypothetical project there's a capital cost required to create that building. In the market conditions we've experienced for more than the last decade, market rents won't retire the full capital cost of the new rental building in most markets in Ontario -- not all, but most. Part of the subsidy flow, then, is to cover the difference between market rents and, to use the term, economic rents. That's the rent required to retire the full capital cost.

That is often called the bridge subsidy. The reason it's called the bridge subsidy is because over time, if there is some inflation in the economy, which in most of our experience has been the general case, and as we move towards retirement of the first mortgage, then that part of the subsidy will reduce and eventually disappear. That's the subsidy from the market rent up to the economic rent.

Then there's a subsidy from the market rent down, which is provided to people who are paying a rent based on their income: rent geared to income. There are those two components to our subsidy flow, one which will change over time in response to change in market conditions and real costs, one of which is attached to a rent-geared-to-income subsidy system.

Perhaps there's one last comment on that. In important respects, that's a direct substitution for the shelter benefit that's provided by Comsoc, as we were alluding to before. If we eliminated the financial support for OHC and non-profit and cooperative housing in the province, which is about $900 million this year, something like $350 million or $380 million of it would immediately reappear in the Comsoc budget as a necessary shelter benefit. So a large portion of our subsidy flow is, in effect, a direct substitution for their program expenditures.

Mr Duignan: The second part of my question is that it reaches a point where you have the crossover effect. Is it correct then that the co-op and non-profit end has to begin to repay a portion of that bridge subsidy? That starts somewhere between 11 and 15, depending on location and size.

Mr Burns: Yes, there are program arrangements that are like that. The reason I didn't go on too much is that the truth is there have been eight different ways of delivering this program. There are eight different approaches to this particular issue. Yes, there are a significant number of the ones we were looking at in this audit to which that arrangement applies. That is repayment of that subsidy flow later on in the project's life.

Mr Duignan: I'd like to pursue this question maybe tomorrow but I want to ask, on that particular point, do you have an estimation of the amount that will be paid back to the ministry on those programs that have that component in them?

Mr Burns: I don't. No.

Mr Duignan: Have you done a forecast?

Mr Burns: The problem is that we're talking about forecasting some years out, 5, 8, 10, and our forecasting is fundamentally built around three- and five-year forecasts, which are the typical budgeting cycles. The backing out or bridge subsidy is essentially after that forecasting horizon. We certainly have the fundamentals, if one wanted to do such a forecast. We haven't done one.

Mr Duignan: There's a difference, then, between various programs. For example, in the ILM program you just pay a direct RGI subsidy. There's actually no bridge subsidy paid to that at all. That comes from the federal government and that's again different than the 56(1) program, which was a federal program, and they just had a 2% buydown in the mortgage.

Mr Burns: And that's different again from 15(1) and that's different again from the provincial unilaterals, so there are a number of different formats.

Mr Duignan: Which one have you been on?

Mr Marchese: Mr Chair, one last question.

The Chair: I think so, Mr Marchese.

Mr Marchese: Mr Burns, on a lighter note, are you having fun?

Mr Burns: Absolutely.

Ms Poole: You're a sick man.

Ms Harrington: I have another question.

The Chair: The standing committee on public accounts is recessed until tomorrow morning.

The committee adjourned at 1658.