Government Contributions To Housing Costs Should Benefit The Neediest People
Posted December 1, 2023
The federal and provincial governments have announced initiatives for affordable housing. Some of their initiatives focus on the wrong target.
Anything that increases the supply of housing is good for all parts of the market. The federal commitment to expand the capacity for insured loans by Canada Mortgage and Housing Corporation (CMHC) is useful. So are initiatives both federal and provincial to import skilled tradespeople.
So is the Housing Accelerator Fund, which bribes municipalities to speed up processing and waive zoning provisions, such as those that restrict housing types or density.
On the other hand, the “Canadian Mortgage Charter” is toothless hot air. It asks banks and other financial institutions to do what they are already doing to help borrowers. Many of them are struggling with payments because their interest rates have gone up. There is no legislation and no enforcement of the government’s “expectations.”
There is considerable confusion around the meaning of affordability. Back in 1986 CMHC and the provinces agreed to measure housing affordability based on whether the household spent 30% or more of its average monthly total income on shelter costs.
This is far too simplistic. A single person making $80,000 per year can afford much higher rents than a family of four. That family can afford higher rents in low-tax Alberta than in high-tax Nova Scotia.
A family of four with one earner making $65,000 can more than double its budget for shelter if the other parent gets a job at $65,000. Their costs for other things like food and recreation will not double.
CMHC acknowledges the flaws and has developed the Housing Hardship Concept, which addresses the topic more thoughtfully.
The goal of government policy should be to support people experiencing housing hardship. That is achieved by the federal Affordable Housing Fund, which is receiving more money to support non-profit, co-op, and public housing providers of housing for needy people.
It is not achieved by CMHC providing interest rate deductions in exchange for some or all of the units in a project receiving rents 10% or 20% lower than the market for its area.
The problem is that there is no process to ensure that the tenants who get those reductions are people in need of government support. Some of the projects receiving the funding would be out of reach for low-income people, even with the discount.
Nova Scotia has announced a program that makes the same mistake. It has identified provincially-owned lands that can be made available for housing. Developers are invited to make proposals to participate.
The Province agrees to transfer properties to them for a nominal fee, subject to specific terms and conditions being satisfied that will lead to the land being used for housing, and that a percentage of the units are “affordable.”
The conditional approval allows them to begin their pre-development planning, financing, and design work. Ownership transfers to the developer once all the terms of the agreement have been met.
Like other programs, the province requires that “affordable” units would be available at or below 80% of the average market rents (AMR) for that location. CMHC updates the AMR data annually.
As with the federal program, there is no process to reserve these units for people experiencing housing hardship. Instead, the developer might favour friends or family members, or just the first in line. If the land is especially valuable—say a site on the peninsula in Halifax—80% of the average market rents would still be a big number.
It would be far better to let the developer charge full market rates and require that 20% of the rents be sent back to the province to support people in need. There it could be used to broaden the scope of the rent subsidy program.
Or, the monthly amounts could be accumulated until there was enough to enable a project by a non-profit, co-op, or public provider of housing. That is how to get people out of substandard accommodations, or tents.
Perhaps the worst idea currently in fashion is Halifax Regional Municipality’s proposed inclusionary zoning, which requires a developer to make, say, 20% of the units in a project available to rent at a 20% discount from market rents.
That will seriously discourage developers from starting new buildings, while the federal and provincial governments are having to provide sales tax relief to get shovels into the ground. And it will do nothing to support the people who need housing most.
Municipal Affairs and Housing Minister John Lohr has, from time to time, felt the need to overrule HRM decisions. Inclusionary zoning should receive his attention.
All three levels of government have targeted the need for more and faster housing. They need to improve their aim.