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Affordable Housing Versus Housing Affordability

Written by Posted On Monday, 08 January 2018 11:40

Canada's long-awaited National Housing Policy, released late in 2017, set "bold" goals to reduce chronic homelessness by 50 per cent, remove 530,000 households from housing need and create four times as many new housing units for "Canadians working hard to improve their quality of life," says the government. It pledged $40 billion over 10 years to achieve these goals.

The strategy will "help address very pressing issues facing vulnerable Canadians with unmet housing needs," says Robert Hogue, senior economist at RBC Economics. "It is not about homeownership affordability issues for middle-class Canadians."

Hogue adds, "Those hoping for some kind of help over and beyond existing programs to become a homeowner will be disappointed."

In an op-ed for the Globe & Mail, University of Toronto professor David Hulchanski says, "A national housing policy would not simply subsidize some of the more obvious failings of our housing system while keeping everything else the same. But this is all the ‘strategy' does. The word affordable is mentioned about 70 times, with no definition of affordable housing…Housing system, housing market and market failure are not mentioned at all…"

Commenting on the strategy's preliminary report, Sean Speer and Jane Londerville of the Macdonald-Laurier Institute wrote, "Its principal weakness is its under-emphasis on market-based housing…Talk of a ‘furthering the progressive realization of the right to housing' seems to supersede more practical questions about how we promote and support homeownership in Canada and the proper role of the federal government. It is difficult not to read the materials as a manifesto on social housing at the expense of new thinking on how to support homeownership in the market-based part of the housing market."

In their report A Place to Call Home, Speer and Londerville say that affordable housing and housing affordability are different and require different policy responses.

"Social or affordable rental housing represents only six per cent of the market. Yet it has seemed to consume a disproportionate share of the government's attention on the housing file.

"It is not to diminish the importance of social housing or the potential for new thinking on how the federal government can more effectively support those who require social housing…..but it is to remind federal policy makers that a singular focus on social housing will neglect the principal housing concern for most Canadians, which is whether they can afford a home that meets their need in the market-based share of the housing market."

They say the government must adopt a pro-homeownership agenda to help Canadians to afford a home, "especially in light of the overwhelming evidence that homeownership is associated with a raft of economic and social benefits."

The government must make sure it offers the right incentives, say Speer and Londerville. "The U.S. mortgage interest deduction is a prime example of a poorly designed policy that gets the incentives wrong," they say. "Encouraging homeownership fueled by debt rather than equity makes buying a house a source of instability -- not the foundation of the middle class.

"The question, then, in our view, is not whether government policy should promote and support homeownership, but how?"

The most recent government initiatives, in contrast, make it more difficult to qualify for a mortgage. Concerned that Canadians are acquiring too much debt, regulations kicked in this year aimed at cooling down the hot housing markets in Vancouver and Toronto.

Speer and Londerville suggest three ideas that could be considered to help boost homeownership: reducing the cost of mortgage insurance fees, "measures to reduce interest rate risk for borrowers and "gradually shifting from relying solely on a mortgage insurance model for first-time buyers to one that incentivizes higher down payments and more equity."

But Hogue says, "It's hard to argue that we need more buying incentives in Canada when our ownership rate (almost 68 per cent) is one of the highest among developed countries. And all the more so at a time when the supply of housing units is struggling to meet homebuyer demand in several regional markets across the country."

Developer Mitchell Cohen, president of The Daniels Corporation, which is working with Toronto Community Housing to redevelop the Regent Park complex, is more encouraged by the new strategy. "These developments deserve a heartfelt hallelujah, as they represent a fundamental shift in thinking, a shift that recognizes shelter as a fundamental human right, the essential infrastructure of a healthy society."

But he says it's disappointing that much of the funding is tied to the provinces matching the funds and that none of the federal money will begin flowing until 2019.

Cohen says cities need to adopt inclusionary zoning bylaws and "stand up to the naysayers in the development industry and demonstrate that we have the strength, the vision and the leadership to build cities that are truly inclusive."

In the past, when the City of Toronto and the province had surplus land, they would simply sell it off to the highest bidder. Cohen says there are now proposals that would require 30 per cent of the units built on these lands to be affordable. He says there has been an "enthusiastic industry response" and developers are eager to build on these lands.

"This is a game-changer, a bold step forward and one that the federal government should emulate immediately," he says.

The Macdonald-Laurier report says, "Federal housing policy has evolved over the decades with little coherence or strategic thinking. It frequently shows.

"Federal housing policy should start to look like it was purposely designed rather than a mishmash of disparate initiatives and measures."

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Jim Adair

Jim Adair is editor of REM: Canada's Real Estate Magazine, a business publication for real estate agents and brokers. He has been writing about Canadian real estate, home building and renovation issues for more than 30 years. You can contact Jim at

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