By Jane Londerville, April 10, 2019
The Liberal government launched its National Housing Strategy to great fanfare in November 2017. Proclaimed to be the first such strategy for Canada, it is a 10-year plan with a $40-billion funding commitment. Specifics of the programs to support the strategy have since been announced. But the rollout of funds and production of units has some housing specialists concerned.
The National Housing Co-Investment Fund, for example, provides mortgage loans for the construction of affordable rental housing. The loans have 10-year terms, 50-year amortization periods, and require interest-only payments once the funds have been advanced.
Projects may also be eligible for a capital contribution to make them economically feasible, although applicants are encouraged to only use the loan portion of the program. These funds can be used for affordable rental, Indigenous, or supportive housing. In terms of affordability, at least 30 per cent of the units must rent for less than 80 per cent of median rent for the area, as measured by the Canada Mortgage and Housing Corporation (CMHC).
This program requires applicants to complete an onerous 200-question submission in order to be considered. Evidence of partnerships between non-profit housing providers, different levels of government, and private-sector developers is required. To make these developments economically feasible at affordable rents, grants from municipal or provincial governments will be necessary. To date, only Ontario, British Columbia, Alberta, Price Edward Island, Yukon, and the Northwest Territories have signed new federal/provincial agreements, according to CMHC’s website. Previous agreements expired March 31.
The Rental Construction Financing program seems designed primarily to get more rental stock built in cities with very low vacancy rates. It provides low-cost loans for up to the full cost of residential unit construction, with 50-year amortization periods.
At least 20 per cent of the units must be rented at less than 30 per cent of the median income for the area for at least 10 years, and the overall income for the property must not be more than 90 per cent of what could be achieved at open market rents. These units are not likely to be particularly affordable, although they will supplement aging purpose-built rental stock across the country.
It seems both these programs are meant to replace, at least partially, the Investment in Affordable Housing (IAH) program previously in effect (IAH funding may continue but no allocations have been made at the moment). The IAH provided significant grants to developers of affordable rental housing, jointly funded by the federal government, province or territory, and local government. All units in the development needed to be rented at 80 per cent of average market rents for at least 20 years.
It would appear the new programs are designed to be less expensive than the previous one by lending cheap debt rather than providing grants. However, the impact is to produce fewer “affordable” units in each building and, for the Rental Construction Financing program, keeping them affordable for a shorter period of time.
It is also widely recognized that rents at 80 per cent of the market rate are not affordable to the most vulnerable. Many households that are renting pay far more than 30 per cent of their income on housing.
The Canadian Housing Benefit is set to launch in 2020 to provide funds to households living in appropriate housing but who are struggling to afford rent and other necessities. This is a joint federal/provincial program that will require extensive negotiations with each province and territory to set up.
Given the number of bilateral agreements signed to date and the complexity of each province’s social support system, there is substantial concern whether these negotiations will be completed satisfactorily and on time. Instead, some are recommending the federal government develop this support on its own without requiring provincial/territorial funding.
On a positive note, the federal government has worked with social housing providers whose operating agreements were expiring to develop ongoing funding models to keep these as rent-geared-to-income housing. There was concern that without ongoing support many of these would become market-rent housing.
The government released a status report on the National Housing Strategy in November 2018, one year after its unveiling. However, the report covered the period from 2016 to 2018, which included many developments under the Investment in Affordable Housing program already in progress prior to the launch of the strategy. It is difficult to separate out how the new initiatives are faring, but front-line housing activists are concerned.
Importantly, the jury is still out on the number of affordable units that will result from the new programs.
Jane Londerville is a retired associate professor in real estate from the University of Guelph and a Munk Senior Fellow at the Macdonald-Laurier Institute.