Policy Statement

Applicants that are Established to Relieve Poverty by Providing Rental Housing for Low-Income Tenants

Reference Number
CPS-020

Effective date
April 1, 2003

Purpose
This policy statement outlines the Directorate's policy for the charitable registration of applicant organizations that are established to relieve poverty by providing rental housing for low-income tenants.

Statement
Based on the provisions of the Income Tax Act and on common law, the Directorate has determined those organizations that relieve poverty by providing rental housing for low-income tenants are eligible for charitable registration.

Definitions

Beneficiary class: class of poor, needy, necessitous, underprivileged, low-income, in financial need, of small/limited means, or an acceptable synonym

Implementation

1. This policy statement applies only to applicants that are established to relieve poverty by providing low-income tenants with housing suited to their means.

2. Other applicants supplying accommodation to their clients may also be charitable, but under a different charitable category, such as the relief of distress and suffering caused by a mental or physical disability, a symptom of aging, or violence against the person. They provide specially adapted facilities and services that help their beneficiaries overcome or manage their particular difficulties[Footnote 1].

A. Wording of the applicant's charitable objects

3. The applicant's objects must clearly identify its beneficiaries. Objects referring to beneficiaries of "low and modest" or "low and moderate" income will need to be supported with the actual criteria by which beneficiaries will be selected, and how the applicant will provide the services only to those who are poor, as defined by generally accepted measures.

4. When the beneficiary class is only identified by reference to some group, such as Aboriginals or refugees, the members of which contain a high proportion of poor individuals, the applicant may qualify for registration as a charity if

• it amends its objects to refer, for example, to "low-income Aboriginals" or "needy refugees," and

• it provides documentary evidence (for example, the provisions in its operating agreement with a government housing agency that specify tenant selection criteria) that it serves an appropriate beneficiary class.

5. An applicant whose formal objects fail to identify appropriate beneficiaries (for example, an object simply "to provide affordable housing") may qualify if

• it amends its objects to identify a proper beneficiary class, and

• it provides documentary evidence that it serves an appropriate beneficiary class.

6. It is desirable, but not mandatory, that formal objects also identify that the organization proposes to provide its beneficiaries with relief, help, assistance, or some other acceptable synonym and that it proposes to do this by offering them low-cost/low-rental housing.

7. Two examples of a fully acceptable main object are:

• To provide and operate low-rental residential accommodation and incidental facilities exclusively for persons of low income; [senior citizens primarily of low or modest income; and disabled persons primarily of low or modest income][Footnote 2].

• To meet the needs of low-income persons by providing them with housing and any associated amenities upon terms appropriate to their means[Footnote 3].

B. Method of operations

8. Beneficiaries must pass a screening mechanism to determine their eligibility. The organization may administer the screening mechanism, or it may choose to select from the waiting lists established by other agencies of those in housing need.

9. The screening mechanism must be administered at least annually, and policies established to handle cases where tenants' incomes rise to the point that they are no longer eligible beneficiaries. This is to ensure that the proportion of low-income beneficiaries does not drop to the point where we can no longer consider the organization as operating exclusively for the relief of poverty.

10. Tenants who are not eligible beneficiaries must pay market rents.

11. All housing charities may have up to 10% of their units occupied by tenants paying market rent. This is considered an incidental and ancillary activity, and allows for such situations as once-eligible tenants continuing to occupy their unit until they can find alternative accommodation.

12. The organization itself must relieve poverty. It can do this by leasing units to beneficiaries at below market levels. If it receives government payments that fully compensate it for leasing units at a loss, this condition is considered to be only partly met, and the organization does not qualify unless other evidence supports the conclusion that the organization's overriding focus is poverty-relief (see paragraph (13)(d) below)[Footnote 4].

13. In some situations, up to 33%[Footnote 5] of the units may be occupied by market-rent tenants. These are where:

1. the rental activity is part of a larger regeneration scheme for a depressed neighborhood, in which keeping existing residents in place or attracting new residents is necessary to achieve the charitable purpose; or

2. the project contains over 100 units, and market tenants are needed to prevent social isolation from the rest of the community; or

3. if,

   • the project results from a partnership between a municipality and the organization;

   • the project has received substantial financial support from the municipality because the municipality has determined the project will reduce its welfare costs, and

   • the proportion of market units has been calculated so as to cover the carrying costs of the project, then the project may be considered charitable under the additional charitable purpose of relieving the burden of welfare costs on the municipal taxation base; or

4. there is strong evidence of the organization's overriding focus on poverty-relief; it shows, for example, characteristics such as the following:

   1. at least 50% of tenants fall into a very low-income category, such as that represented by the concept of "deep need" or "deep-core need";

   2. the project is directed towards beneficiaries from a specific group that is considered to have a high percentage of individuals at risk of homelessness, such as Aboriginals, single-parent families, those facing physical or mental challenges, and those with a history of addictions;

   3. selection criteria are weighted in favour of the neediest or those considered hard-to-house, or the organization has agreed to take all its beneficiaries from a housing list maintained by a government agency;

   4. the project is located in a neighborhood where a high proportion of residents are in core housing need;

   5. to be accepted, tenants do not need to provide references, to have a minimum income level, or to give deposits;

   6. the project includes free or affordable counselling and other services directed to helping tenants overcome the limitations contributing to their poverty;

   7. the project is sponsored by an existing charity working to relieve poverty; or

   8. a provision that the proportion of market tenants may be reduced if their presence is no longer required in order to carry out the charitable purpose.

14. The presence within the project of areas leased to commercial tenants is normally an indication of non-charitable status, except where it can be determined that such rentals involve areas unsuited to habitation, or are a specific design feature intended to provide necessary goods and services for tenants without transportation or with mobility impairments. However, even in these cases, the commercial space cannot exceed 10% of the project's area.

15. Where a project consists of several buildings sharing the same grounds, the above criteria can be met on the basis of the total for all buildings on the grounds, that is, if Building A and Building B have the same number of units, and Building A has no market tenants and Building B has 50% market tenants, the project will be considered to have 25% market tenants. Buildings on separate grounds must each meet the criteria on their own merits.

Information required to determine charitable status of applicant housing organizations[Footnote 6]

16. Organizations applying for charitable status must complete the appropriate form (T2050) and supply the information and documents listed on the form. In their statement of activities (or in other documentation attached to the application), applicants proposing to relieve poverty through the provision of low-rental housing must specify:

• the particular clientèle they intend to serve;
• how they select their beneficiaries;
• the proportion of tenants who are not eligible beneficiaries, and whether such tenants pay market rent for their units;
• if any space is leased to commercial tenants, the rationale for doing so and the proportion of commercial space in relation to the total floor-space in the project; and
• if more than 10% of units are rented to non-eligible beneficiaries, how they would qualify under the exceptions listed in paragraph (13) above.

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Footnotes

[Footnote 1]

Because the proposed criteria for qualifying for registered charity status are being broadened, charities that are and continue to be registered should not be affected, assuming that their manner of operation remains largely the same as when they originally applied for registration. However, this clause is included to ensure that the proposed changes do not adversely affect existing registered charities. A more difficult problem may be non-profit corporations that previously could not qualify for registered charity status, but which would now qualify under the broader criteria. Technically, such organizations would have to register as charities or lose their exemption from tax under the Income Tax Act.

[Footnote 2]

The reference to "low or modest income" is acceptable in the context of providing housing that is adapted to meet the needs of seniors or persons with disabilities. Such tenants may or may not be poor. It remains a charitable service to provide them with specialized accommodation that they would not otherwise be able to afford.

[Footnote 3]

The first example is based on the standard objects we have jointly approved with the Ontario Office of the Public Guardian and Trustee. (The full list of these pre-approved objects can be found in the Ontario Government publication, Not-for-Profit Incorporator's Handbook/Guide à l'intention des fondateurs de personnes morales sans but lucratif.) The second example is adapted from the standard object used in the United Kingdom, cited in H. Picarda, The Law and Practice Relating to Charities (1999:820).

[Footnote 4]

The reasoning here is based on an assessment that one difference between a housing charity and a housing non-profit organization is that the former is doing more than simply administering government funds on a non-profit basis. If an organization can show that it is itself providing relief to those who are poor, then there is no need to enquire further. If it can only show it is administering a government-funded program, then we need to look to other evidence (see paragraph 13(d)) that its overriding purpose is the relief of poverty.

[Footnote 5]

Why pick 33%, and not 40% or 50% of units to be rented at market rate? This is because renting at market rates has to remain an "incidental and ancillary" activity that is clearly subordinate to a dominant charitable purpose. We could find no case law accepting 40% market tenants.

[Footnote 6]

The type of information the Directorate needs to determine charitable status depends on the nature of the organization. This section notes the type of supporting material needed to decide whether the organization meets these criteria.