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An analysis of the recent BC Housing review ordered by the province

August 2nd, 2022 · No Comments

The province ordered a review of BC Housing last year to see whether how it was managing as the size and complexity of its mission had been expanded considerably under the NDP.

That review came out and has been universally viewed as a sign that something is seriously wrong at the agency, which has a budget of about $2 billion a year.

But a former Vancouver planner who was in charge of the city’s efforts on social housing, Cameron Gray, thinks there is a lot of missing information in the report. Here’s his take

Ernst & Young: Finance and Operation Review of BC Housing July 28, 2022

I was in charge of the City of Vancouver’s affordable housing initiatives from 1990 to 2010 during which time the City partnered with BC Housing on a wide range of social and supportive housing projects. These were by and large successful partnerships that produced several thousand units of social and supportive housing that provide safe, secure and affordable homes for families and individuals who otherwise would be paying unaffordable rents, be at risk of homelessness or actually homeless. I was surprised by the Ernst Young review of BC Housing as reported in the press.

It contradicted my experience (albeit of a dozen years ago) but also the positive assessment from the Province’s own Auditor General when they reported on BC Housing’s recent purchase of hotels to accommodate the growing numbers of homeless in BC.

I’ve now read the Ernst Young review of BC Housing finances and operations. Twice. It is a travesty and suffers from a major flaw that pervades the report and renders it virtually useless.

The fundamental problem with the report is its failure to describe what BC Housing does and how it operates now. It provides little of the relevant background. As a result it is impossible to know just how serious the issues are that the review identifies; whether there is a big problem, small problem or no problem.

A reader doesn’t know if BC Housing is an unmitigated disaster or only in need of fine tuning – as well as a major investment in IT. In some cases, it’s not clear that there is a problem.

For example, EY recommend that BC Housing’s priorities be aligned with the Province’s, who EY refers to as the shareholder (Ex. Summary and pg. 30/1), but they don’t say what the priorities of each are now and how they are not aligned.

A visit to BC Housing’s website, where BC Housing’s and the Province’s policies and priorities can easily be found in BC Housing’s Service Plans and in the Minister’s mandate letter respectively, and one can see that their priorities are, in fact, well aligned.

Before criticizing BC Housing for not collecting the data needed to monitor their programs, the report should have described the data BC Housing collects now and how it is used. Before recommending that BC Housing improve its documentation, as the EY report does in several places, it would be good to describe what BC Housing documents now and where the gaps are, something the EY report doesn’t do.

This problem pervades the report. To be useful it needs to, but rarely does, contrast what BC Housing does now with what the authors think BC Housing should be doing.

An example: EY recommend BC Housing improve its documentation while noting in the report that BC Housing’s documentation they reviewed for projects (pg. 36) and for selecting operators of non-profit housing providers (pg. 45) was complete and thorough – though this doesn’t appear in EY’s Findings.

Having said that, EY note that there are few sites for supportive and women’s transition housing, and approval of projects under these programs is necessarily opportunistic, but then complain that there isn’t evaluation criteria for them.

However, the programs themselves include the criteria a project needs to satisfy to qualify for funding (BC Housing’s Program Guide on BC Hsg.’s website). Evaluation criteria are required if there is competition for funding which in the case of these programs there isn’t. EY doesn’t describe the programs or how decisions are made, so a reader might think there is no process at all, and we have the story in June 28’s Vancouver Sun on the Kitsilano supportive housing project stating that the BC Housing board was fired because “the agency sometimes handed out multi-million dollar contracts without a rigorous process to ensure the best provider was chosen” when the EY review says no such thing. The report is saturated with generality (a lot of may be this and may be that) and provides few specifics or concrete examples.

For example, on the question of outcomes, which EY contrasts to outputs, units for BC Housing, it recommends BC Housing re-introduce measures of success it once used but doesn’t 2 say what those measures were (pg. 30).

The implication is that EY is recommending that BC Housing’s outcomes should include things that can’t be measured, like improving access to affordable housing, or measures BC Housing can’t control, like reducing homelessness; if society manufactures homelessness faster than BC Housing can provide shelters and supportive housing, homelessness will increase through no fault of BC Housing!

Actually the outcome that matters, and which BC Housing does control, is that every social and supportive housing unit BC Housing subsidizes be occupied by a person or family who would otherwise be paying too much for housing, be inadequately housed, or be homeless.

This data BC Housing does collect and, through its processes (stringent as non-profit providers can attest), is an outcome that BC Housing measures and monitors closely.

The provision of safe, secure and affordable homes (as opposed to units) is the outcome that matters, and needs to be and is BC Housing’s primary focus.

I could go on, but will try not to. But just a couple more examples. EY notes that in one case a subsidy payment was made before the operating agreement was signed, and on that basis recommends controls be put in place to ensure it never happens again (Recommendation 5-11).

But they don’t say why it happened; was it an oversight or was it because of some urgent circumstance, such as having to move homeless into a building before documents could be finalized? If the latter, then what would the proposed control do? Leave a building empty for a month or two?

The facts matter and EY doesn’t provide them.

Another example is EY’s recommendation that BC Housing conduct variance analysis, in particular as regards inflation, as they question whether the 3% estimate used in 2021 is still appropriate.

What they don’t do is describe is how BC Housing already deals with variances and, in particular, inflation. To imply that BC Housing doesn’t now is a cheap shot.

BC Housing is in contact with contractors daily and reviews non-profit operator budgets continually. It has better information than most as to inflation pressures. It doesn’t need EY to tell them to do the obvious.

And a last one: EY criticizes BC Housing for not reviewing it’s policies every 3 – 5 years but don’t tell us what the current review process is. Are its policies never reviewed, how often, how many fail the 3-5 year test? Is it a big or small problem or what? A minor example, but typical.

In short, the EY review is not the devastating critique that some think it is. The problems it identifies are largely the result of BC Housing’s rapid growth (BC Housing’s work and budget more than doubling in the past 5 years in response to the affordable housing crisis), and the consequences of the Covid pandemic, in particular on BC Housing’s capacity to do its work due to staffing shortfalls.

The most serious need EY identifies is upgrading the IT systems. Will Treasury Board fund that? It won’t be cheap. Much of the rest is ‘i’ dotting and ’t’ crossing.

So why the EY review and why what appears to be the Minister’s overreaction to it? Supposedly the review was motivated by the Little Mountain fiasco.

But the review doesn’t discuss Little Mountain, and its recommendations do not address how to avoid similar decisions being made in the future. This isn’t surprising, since the Little Mtn. deal was politically driven – get as big a price as possible to boost operating revenue in an election year, so the government of the day could claim a balanced budget, even if it meant leaving the site vacant for a decade or two.

What other reason then? Well, the fact that implementation of 19 of the 44 recommendations are to be led by the Chief Financial Officer, and only 5 by Development Services and 2 by Operations, the divisions that actually deliver and provide affordable housing, is a clue.

EY recommends that the role of Finance be “elevated” and that Finance should be embedded in all the departments where it should “take ownership for and actively manage the financial drivers of value” (Fig. 4) whatever that means – might give us another clue.

Even the IT recommendations are to be led by the CFO, which doesn’t make much sense given that EY recommends the CIO report directly to the CEO.

And it is interesting that Finance is 3 seen by EY as representing the shareholder’s (the Province’s) interests within BC Housing, see Recommendation 2-4, when surely that is one of the Board’s key roles.

It’s hard not to think that the review is the result of accountants hiring accountants to recommend more power to accountants!

And so it is not surprising the new board consists of 5 finance focused current and former senior bureaucrats and 2 indigenous business leaders. And I suppose also not surprising, though it should be, that it doesn’t include anyone with real experience in housing development, either from the for-profit or non-profit sector, or a tenant, or anyone with experience in operating housing, either from the for- profit or non-profit sector, or anyone from the services sector.

What I suspect is happening is that the keepers of the purse in Victoria (Treasury Board and Finance) want to rein in BC Housing, and the Province’s investment in housing in general, as they are concerned that the cost may double again over the next 5 years.

This is, in fact, a valid concern. Even if the land and construction costs are paid for, supportive housing for high need populations (homeless, substance users, mentally ill) requires on-going annual subsidies so every new building requires an increase in BC Housing’s annual operating budgets.

It’s not as if the Province doesn’t have a lot on its plate: rebuilding Lytton, the Coquihalla, the debt hangover from Covid, health care capacity, reconciliation, etc. That said, housing affordability and homelessness remain a crisis in BC.

My guess is that the affordable housing commitments the government has made will take a lot longer to fulfill than originally promised and may shrink. It is not surprising that the Minister has said that his housing priority as Premier will be affordable housing for the middle class, which costs a lot less/unit than housing for the homeless and other high need populations. It seems the government doesn’t want to come out and admit that the cost of meeting its affordable housing commitments (see the Minister’s mandate letter) is more than a challenge, and may exceed the Province’s capacity or willingness to pay, so have used this review as cover, hoping or pretending that by implementing its recommendations “to gain efficiencies and creating more capacity” (Executive Summary) aka ‘doing more with less’ which, unfortunately, usually means doing less, and often with more – more reviews, more monitoring, more reports, and more delay.

So even if the EY review is not the condemnation of BC Housing as some think, commentators may be right in thinking the Province is about to declare, not just housing supply, but even housing affordability and homelessness, to be problems caused by and therefore to be solved by municipalities at their expense.



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