Community housing group seeks mortgage refinancing

Default image

"A need for significant capital repair", coupled with a lack of money to deal with it, is prompting the Ottawa Community Housing Corp. to ask the city to approve a mortgage refinancing.

Although the group has subsidies and funding from existing capital repair programs, OCHC says those are "insufficient to complete the work that is required," and warns much of its portfolio is falling into almost irreparable disrepair.

It is looking to take advantage of the low-interest rate environment to refinance its existing debt and to generate additional revenues to partially fund the work. 

A staff report describing the situation will go before the community and protective services committee meeting Thursday. The city is OCHC's sole shareholder.

If the proposal goes through, the city's annual payments of $2.09 million on the eight properties under consideration would not change, but the amortization period would be extended to 30 years.

The existing amortization on these properties ranges from 33 months to 15 years.

OCHC has applied to Infrastructure Ontario to refinance the eight mortgages, all of which renew in 2012. Its long-term borrowing rates are currently between 3.75 and 4.2 per cent, according to the report.

The amount remaining on the mortgage is $18.4 million. Refinancing the mortgages will fund a loan from Infrastructure Ontario of between $35 million and $37 million. That loan will pay out the existing mortgages and about $16.6 million to $18.6 million can be used for "priority capital repair work."

"The intention of the refinancing is to leverage the equity in existing assets to generate capital that can be applied toward the repair of the housing stock," the report stated.

"This can be accomplished by extending the amortization period to 30 years for each of these projects at a fixed rate of interest for the duration of the loan. By extending the amortization period and maintaining the debt payments at the current level, it is possible to generate approximately $16.6 million to $18.6 million in capital."

The properties under consideration are Lebreton 1, Strathcona: Sentier, Fairlea Court, Rockingham, Hasenack Place, Allard Place, Harmony House and Blohm Court, according to the report.

The report also warned that there is a gap between OCHC's existing annual funding and the required repairs to the aging portfolio, and requested consideration of the need for more capital investments. The average building in its portfolio is over 35 years old.

A 2008 building condition assessment found $211.4 million in capital repair classified as "past due and immediately required", and $121 million more needed during the next five years. 

"This housing had reached a point where many building systems (e.g. roofs, elevators, waste stacks) required major repair or replacement. Many communities required extensive renewal or redevelopment and it was, and still is, a challenge to maintain them adequately," the report stated.

"Without further capital grants and increased annual funding, the backlog will continue to grow. There will be a direct impact on the quality of life for tenants and the eventual loss of stock as some buildings deteriorate to a point where they can no longer be rented or occupied."

In recent months, the corporation has drawn up plans to add more townhouses to its portfolio, and put solar panels on a fifth of its houses and apartments.

The group is Ottawa's largest community housing provider and the second-largest in the province after an agency in Toronto.