In less than a week we will know the outcome of the federal election in Canada. At the top of mind for many voters is the affordable housing crisis and the main party leaders have been quick to put forward their proposals for dealing with this as a sure-fire vote winner. The turnout of voters aged 18-24 increased by over 18% in the 2015 election (the largest increase since records began) and with frustrated millennials seeing their dreams of home ownership ebb away, the next prime minister ought to have a robust action plan.
Policies at a Glance
The main four parties are tackling the affordable housing crisis to varying degrees; some policies targeting individuals, some incentivizing the private sector and others with a combination of measures. The liberals appear to have the biggest manifesto in relation to housing but bigger doesn’t necessarily mean better or more effective.
Will any of this truly make housing more affordable? And do we want house prices to stabilize or even drop? Well, critics would say not. This is a clear case of politics getting in the way of a serious human rights issue with no party wanting to alienate the older, more fortunate demographic whose property is usually the only real way for them to build any wealth.
Some of the policies may help young people and first-time buyers get a foot on the housing ladder, however by allowing them to borrow more money puts them in a position to enter into the bidding wars along with everyone else, essentially driving prices up further and doing nothing to alleviate the predicament of those in the lowest income brackets who will never be in a position to borrow nor save more.
Most parties seem to be focusing on home ownership yet more clarity is needed on how they can meaningfully address the lack of affordable rental and social housing for those most in need. Whilst the Liberals have initiated an affordability program a few years back, the jury is out on whether it’s actually served its purpose and added much-needed ‘deeply affordable’ housing.
Redefining Affordable
An ongoing debate has been sparked by Liberal opponents and housing experts around how affordability is defined. The Liberals’ National Housing Strategy (NHS), was introduced back in 2017, a program that now amounts to $70-billion of funding aimed at addressing affordability and reducing homelessness. As part of this program, the Liberal government has been writing cheques to developers under the Rental Construction Financing Initiative (RCFI), in return for them creating housing specifically for rental, that must be rented for a period of at least 10 years at less than 30% of median family income for the area. The loan terms on offer for developers include low interest rates and 50-year amortization periods on what’s thought to be finance exceeding $300 million in some cases.
The issue isn’t that developers are taking the money and not delivering, they’re delivering exactly as promised according to the terms of the loan in fact, but those terms need to be rewritten with a different definition of affordable. Using the current benchmark of 30% of median income for the area results in units that are unattainable by those earning the least because the average income of a renter is generally way below the area average. A CBC analysis of over 100 projects so far developed under the RCFI scheme revealed that although rents are indeed lower than market rate, they’re nowhere close to being affordable as evidenced by projects such as Birch Meadows in New Brunswick where rent will average around $1,500 versus an average of $880 for the area in the previous year.
Birch Meadows, Moncton, NB - 76-Apartment Complex
Pivotal Role for Developers
With a few days to go until the new Prime Minister is announced, it’s still too close a race to call between the Liberals and the Conservatives. Whoever wins out, it seems that both parties’ proposals will fall short of what is required to fill the housing gap, particularly in the rental market. Targeting foreign buyers is rarely the answer as this group is not fueling the problem and significantly increasing supply through incentivizing developers is failing to have the desired result for low-income renters. It may be that the Liberals can build on current policies to encourage legitimate affordable housing developments exclusively for renters but they’ll be chasing a moving target as population grows.
The incoming government faces a more complex problem than it seems and they will not be able to go-it-alone; they don’t build houses after all. Aside from the depleting stock of rental units, wider economic factors such as inflation and negative wage growth are rearing their ugly heads to complicate matters further. Canada’s new or ongoing leader needs to recognize that developers are crucial to creating the homes that Canadians need and maybe they simply need to put into action the 2019 plan outlined by Minister Steve Clark in Ontario’s Housing Supply Action Plan - free-up more land in locations close to existing transport and services, approve new builds more quickly and cut red-tape in the construction process reducing the time and cost it takes to get a property to market; it wouldn’t be a bad place to start.
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