Not making sense: Toronto's 2024 Homeless Shelter Infrastructure Plan & 10-year Capital Strategy
Up this week at Economic and Community Development Committee is a very troubling 10-year capital strategy for homeless shelters.
In a nutshell, the City's plan is to build 20 80-bed City-owned shelters over the next 10 years (a total of 1,600 beds), so that it can:
end some of the very expensive shelter hotel contracts that the City entered into during the COVID pandemic (so these won't be additional spaces, they will simply replace existing more expensive ones),
add a bit (240 spaces) of shelter capacity for youth, Indigenous people, and families, and
create a "flex shelter" to accommodate shelter residents while a shelter is closed for renovations, repairs or an emergency, so that shelter system capacity is maintained.
I've got two main issues with this Strategy:
First, the capital infrastructure target is terrible and bad value for money. It aims to create a whole 240 additional spaces over 10 years--a number that does not meet today's need, never mind the need 10 years from now. And it aims to replace only a fraction of the expensive shelter hotels the City is currently leasing with city-owned spaces, even though City staff say the extra cost of leasing a shelter hotel over 10 years is enough to pay for a brand-new city-owned shelter.
And second, this is a 10-year, billion dollar initiative, yet staff are recommending that Council oversight be removed from procurement and decision-making, and all they are providing is an incredibly vague plan, painfully short on details, and supported by incorrect back-of-the-napkin math. I had hoped that the recent shelter hotel and modular housing debacles would have taught us that proper planning, due diligence, detailed reporting, and Council oversight are necessary to avoid overspending on contracts, project costs ballooning well over budget, and embarrassing situations where Council has no idea that projects are in financial trouble, that public money is being pulled from projects to keep others afloat, and that the City is being ripped off by contractors...but apparently not.
Let’s start with the math problems.
1. The Strategy’s capital cost estimate of $674.5 million just doesn’t add up.
You won't find an itemized project budget in this staff report. Instead, staff use half a page to note that site acquisition could be anywhere from $8 to $22 million per site--or lower if City-owned properties are utilized--and note that development costs can be anywhere from $19.8 million to $41.8 million per site, and give some examples of some of the costs involved. Based on the figures staff provide, the total capital cost for new purpose built shelter development could be as low as $396 million for 20 sites or as high as $836 million for 20 sites. $836 million is almost $200 million, or 23% higher, than the Plan’s total capital cost estimate of $674.5million, which increases the likelihood that this initiative will go hundreds of millions over budget, or only deliver a fraction of the shelter beds it promises.
The capital cost estimate of $674.5 million works out to $325,000 to $421,500/bed, depending on land costs. This per-bed cost is roughly the same as the per-unit cost of the most expensive of the city’s modular housing units (even after going 101% over budget), which cost $381,000 per self-contained unit large enough for at least two shelter beds, if not more, where each unit includes its own kitchen and bathroom, and is in a building with shared amenity spaces and offices. I don't understand why it costs as much to create a space for a shelter cot as it does for an entire self-contained bachelor unit.
2. The operating cost estimate of $498.5 million over the 10-year Strategy doesn’t add up.
This entire initiative is premised on the anticipated operating cost savings of replacing leased shelter hotels with new City-owned purpose-built shelters. To demonstrate the cost savings, the staff report compares per diems at shelter hotels with per diems at a new purpose-built 80-bed shelter ($126 per person per night, or $3.68million/yr). However, the report goes on to estimate that the overall operating cost of implementing the Strategy is $498.5 million over ten years (2024-2033), inclusive of the additional proposed 320 shelter expansion beds and flex site beds opening in 2026 and 2027, which will increase the annual operating budget gross and net by $18.2 million.
It’s unclear how staff arrived at $498.5 million from an operating cost of $3.68 million per shelter per year:
All of the new beds won’t be in operation for the full 10 years, and will only require operating funds once they come online. As the report indicates, shelters will come online gradually over the 10 year period. Based on the Strategy’s planned rollout of shelters, the cost of operating all 1,600 beds as they come online will total $403 million by 2033– 20% less than the staff estimate of $498.5 million. (See figure 1).
Flex beds shouldn’t require additional operating costs at all, since they are replacing existing beds taken out of operation for renovations and repairs. Removing operating costs for the flex beds from the total operating cost calculation would make the cost of operating the remaining 1,520 beds $377 million over the 10-year Strategy– 25% less than the $498.5 million estimate.
Without itemized costs and accurate calculations, it’s unclear a) whether the Strategy’s cost estimates are significant overestimates or underestimates, b) whether the funds available could do more to increase shelter capacity, c) whether the project deliverables are realistic and achievable within the budget allocated, and d) whether Torontonians are getting good value for money.
This problematic math becomes more problematic given that staff are:
3. Asking to remove Council oversight on procurement and decision-making related to a billion dollar project with only vague details.
There are two very problematic recommendations being made here:
Staff are asking Council to provide authority to the General Manager, SSHA to enter new, or amend existing agreements, as required, to open and operate new shelters and related homelessness services required in alignment with the recommendations in the 10-year Homelessness Services Capital Infrastructure Strategy, on terms and conditions they find satisfactory and in a form satisfactory to the City Solicitor, without having provided Council a reasonable or properly costed plan.
Staff are also asking Council to give the Chief Procurement Officer the authority to make awards–with some prescribed conditions– for competitive and non-competitive procurements with a value exceeding $500,000 for which Bid Award Panel, Standing Committee or City Council approval would normally be required, for the provision of construction, legal and/or professional services needed to complete property acquisitions and to carry out pre-development, pre-construction, construction, renovation and conversion of properties for the development of shelter sites.
This is reminiscent of the modular housing fiasco, where final project costs were double the adjusted budget because of inadequate project planning and budget preparation, and City Council had no idea because City staff weren’t reporting to them with critical project information. We need more thoughtful planning and transparency here, not less.
The larger issue here is that the plan itself is bad and fails all Torontonians, but especially our most vulnerable residents:
4. The shelter capacity target of 20 shelters with 80 beds each, 1,600 beds total, is far too low.
There are currently 2,054 people living in COVID shelter hotels. This Strategy aims to replace a little over half of them with permanent shelters, which will leave the City leasing hotels indefinitely. While the staff report makes clear that homelessness is expected to worsen significantly into the future, it only aims to add 240 additional spaces over the next 10 years, even though that number is insufficient for meeting even today’s demand for shelter. Back in 2018 when the 1,000 bed plan was approved, 1,000 beds were needed and expected to be made available that winter. The City set a target of delivering the beds over 3 years (to be completed in 2020). By the end of 2021, only 680 were created. In 2020, Council approved using the remaining 1,000 bed funding to create permanent and supportive housing instead. Of course today those 680 new beds are full, we’ve had to lease thousands of additional hotel rooms, and still our parks and subways are full of people desperate for shelter. An additional 240 spaces over 10 years doesn’t even get us to reaching the 1,000 beds we needed back in 2018, never mind ensuring that all Torontonians will be able to access basic shelter in the future.
I have six recommendations:
1. Give staff the authority to enter into competitive or non-competitive contracts and amend contracts for the purposes of extending existing shelter hotel leases only.
Thousands of shelter hotel rooms leased by the City have contracts that will expire this April unless those contracts are extended. We need those contracts extended soon, and we need them extended indefinitely: due to negligent shelter infrastructure planning, those hotel rooms are now a critical component of our city's shelter system capacity.
2. Direct staff to develop an amended capital plan with increased shelter capacity targets based on shelter demand forecasts and demand models and to report back to Council with a proposed budget needed to deliver the plan.
SSHA has a well established culture of delivering wildly inadequate shelter capacity plans, whether that’s winter plans or long-term capital plans, that leave people to shelter in parks and on public transit and often results in people freezing to death in winter. For a long time SSHA insisted on using shelter occupancy data as an indicator of demand, when these are two very different things. We finally have a source of demand data (albeit imperfect)–the numbers of people calling Central Intake for a shelter bed (and the numbers of those who are unable to access one) yet this data doesn’t seem to have made it into shelter planning. Plans are still being made without considering demand.
It is not enough to note, as staff do in this report, that “Current funding is inadequate to meet the increased demand for shelter services.” If funding is inadequate, then clearly funding must be increased. If 41% of existing shelter capacity is provided through leases for temporary sites, that means replacing these spaces with permanent publicly owned shelters will require the development of 3,754 new shelter spaces. To address increases in homelessness, it is likely more than 6,000 new spaces will be required over the next 10 years.
3. Direct staff to work with CreateTO to identify possible government-owned sites for shelters to maximize the use of capital funds.
4. Direct staff to report back to Council with a range of possible shelter design options and capital cost estimates for each, considering a variety of construction methods, with the goal of developing a cost effective model that can be used for all 20 sites with slight modifications to accommodate various cultural particularities, to ensure an expedited approvals process and lower development and construction costs.
5. Apply the Auditor’s recommendations from the modular housing Audit to this project to ensure transparency, accountability, and good value for money:
#5: Improve reporting processes and transparency in the budget development process by submitting: a. An updated site-specific budget to City Council at the time of site selection, after conducting the necessary due diligence work; and b. For City Council’s approval, any financially material request(s) to increase the budget by project site and the rationale for the additional budget request(s).
#6. Report to City Council regularly on the progress of the shelter projects. Include: a. Comparison of original timeline and actual schedules, with explanations for significant delays; b. Actual final costs for completed sites and projected costs for ongoing sites, compared with initial budgets, with explanations for any significant variances; and c. Details of funding being allocated or reallocated to cover the additional costs.
6. Adjust federal and provincial government asks to reflect the need for more than 6,000 new shelter spaces; present this ask alongside an alternative of significantly investing in new RGI housing, nonprofit deeply affordable supportive units, the acquisition of existing affordable rental units from the private market and meaningful action to stop real estate speculation.
Projected operating costs of implementing proposed Homelessness Services Capital Infrastructure Strategy