What's missing from the "housing" budget?

The housing.
February 21, 2007

BC Budget 2007 is a “housing budget” that does not build much housing.

The budget commits to a mere 250 new social housing units over two
years – a far cry from the 2,000 per year that was built back when the
federal and provincial governments were in the game (before 1993). At
this pace, it will take 17 years to house the homeless of Greater
Vancouver, and that is not taking into account estimates from the Pivot
Legal Society that homelessness could triple by the time of the 2010

There are a number of housing initiatives in the budget, most of which
are fine as things go, such as more shelters year-round for the
homeless, and an expansion of the rent supplements announced last fall.
But the total amount of expenditures is quite small and spread very

For every dollar of housing expenditures in the three-year fiscal plan,
there are four dollars in income tax cuts. And tax cuts are the real
centerpiece, which makes BC Budget 2007 perhaps the most cynical
document in recent memory because it counts the tax cuts as a
substantial part of its housing plan.

The stated rationale is that tax cuts will make it easier for everyone
to pay for their housing. This is an astonishing claim. For example, my
house doubled in value over the past five years, and I already will pay
no tax on the resulting capital gain. Yet, not only did I win the
housing lottery through sheer luck, I am rewarded with a tax cut that I
did not ask for (and that is small enough that it will not be noticed).
In fact, I do not recall anyone, business groups included, who did call
for tax cuts in this budget.

If the $1.5 billion in tax cuts over three years had instead been
allocated to building new social housing, we could have almost
eliminated homelessness. Instead, we have a budget that not only fails
to deliver new social housing, but will be taking 750 existing social
housing units and converting them to supportive housing for seniors.
This is robbing Peter to pay Paul. And it is reminiscent of the game
the provincial government played a few years ago, taking federal money
for low-income social housing and using it to build assisted living
spaces for seniors.

One can only conclude that the provincial government really does not
care about homelessness. Even the 250 new social housing units over two
years are funded out of $50 million in federal dollars. The province is
going to take $250 million out of the 2006/07 surplus to park in a fund
that will pay for $10 million of new initiatives per year, although it
is not at all clear that any of this money will fund new social housing.

Much of the housing effort in the budget is for the benefit of the
middle class: provisions to keep granny in her single-family home (a
measure that actually makes housing for families with children less
affordable); a waiver of property transfer tax for first-time
homebuyers, up to a ceiling of $375,000. In addition, the expansion of
the home owner grant for homes up to $950,000 in value means a person
living in a $900,000 home will be spared $570 per year in property

Tax cuts aside, the fact of the matter is that provincial coffers are
bursting with surplus cash. On top of $3 billion surpluses in each of
the past two years, the 2007 budget will also close in the $2-3 billion
range. The budget document only admits to an underlying surplus of more
than $1 billion, but extremely conservative assumptions about revenues
hide much more than that (this game was invented by Paul Martin but has
been the main story of BC budgets for several years now). In fact, the
government forecasts that revenues will decline in 2007/08 in spite of
projections of solid economic growth.

While almost all of the media attention will be on housing, some other
developments are worth noting. There is the first decent increase in
health care spending in years, which was announced back in January. The
key fact in health care spending is that the budget needs to increase
by 5% per year in order to keep up with inflation, population growth
and population aging. Over the past five budgets, the average increase
has been under 4%. Thus, the 2007/08 increase of 7.3% is welcome and
will help address the pressures that we are seeing in emergency rooms
and elsewhere.

But there was no commitment in the budget to stable multi-year funding.
For 2008/09 and 2009/10, the increases are 2.2% and 3.3% respectively,
so expect health authorities to continue feeling pinched. More money
could be coming, but the budget document repeats the same bogus claims
that health care spending is unsustainable and that “alternatives”
(read: private care options) will be needed.

The areas that fared the best in the budget did not make the press
release. In post-secondary education, there was a 6% increase in
2007/08, though no reduction in tuition fees as many student advocates
had hoped for. And the Ministry of the Environment got a 10% budget
increase, mostly for conservation measures. The budget contains $4
million over three years to get the ball rolling on climate change, but
we may need to wait until next year for some firm financial commitments.

Also noteworthy was an increase in social assistance (welfare)
benefits. For
single employables, long stuck at $510 per month, the shelter and
support portions were increased by $50 each, for a new monthly total of
$610. People with disabilities or barriers to employment will also get
the $50 increase in the shelter component, but oddly, not the support
portion. Any increase in welfare rates is welcome, and clearly this is
a tribute to public pressure and the hard work of community activists
in recent months. But it is a far cry from the 50 per cent increase we
called for in our last two BC Solutions Budgets. Rates were also not
indexed to inflation.

Child care is taking a hit, following the federal elimination of
Martin’s early learning and child care program. The loss is $105
million for a host of programs related to early childhood development,
child care and programs for special needs kids. That the specific
budget (and cut) for child care was not precisely spelled out in the
budget documents speaks volumes about its importance to the government.
And remember that last year’s gimmick was a “children’s budget”.

Like last year’s “children’s budget” that did not build early learning
and child care spaces, Budget 2007 is a huge disappointment, a gaping
mismatch between rhetoric and reality. The provincial government seems
to have got enough of the message to make housing the theme of the
budget, but not so much as to really do something meaningful about it.
This reflects a worldview that places so much faith in the market, that
even when the market clearly fails, government should not step in,
apart from some token measures on the margin.

Marc Lee is the CCPA–BC's Senior Economist. www.policyalternatives.ca