Illustration by Maura Doyle
Sometimes it takes one crisis to bring another into the light.
By the end of March, in response to the global COVID-19 pandemic, all of Canada was in a state of emergency and self-quarantine. Thousands of businesses shut down, sending hundreds of thousands of workers home, with or without pay, indefinitely. In one week alone, a million people applied for employment insurance. Canadians with mortgages were struggling to secure deferred payments from the banks. And while some provinces had temporarily banned rental evictions, none had offered to pick up rent payments for those who had lost their income.
How were people supposed to live in these conditions for more than a few weeks? How were they going to afford their rent? A CCPA report in March by political economist Ricardo Tranjan found that of the 3.4 million households who depend on employment or self-employment income to pay their rent, more than 40% have less than one month’s worth of income saved. And of that group, nearly a quarter only have enough savings to last them a week in the event that they lose their income.
Tranjan’s report called on the federal government to provide immediate relief for low-income households through measures like increased rental subsidies, exempting unemployed low-income households from paying rent, or offering a goods and services tax supplement to low-income and unemployed renters. In the short term, these and other immediate actions would put money in the pockets of everyone struggling to pay the bills in a period of rising unemployment and prolonged quarantine.
But the sad truth is, Canada’s housing affordability crisis has been 30 years in the making. In a nation where housing needs drastically outstrip availability in most cities, and where the private sector is unwilling or unable to build more truly affordable units, could the COVID-19 pandemic offer a once-in-a-lifetime opportunity to embrace new policies and new partnerships with the non-profit housing sector? Could we not use this moment to fix Canada’s housing crisis for good times and bad?
In January, Ottawa became the first Canadian city to declare a housing and homelessness emergency. In the past two years, average rental prices in the city have risen by 13.5% while vacancy rates are stuck around a relatively low 1.8%. (For comparison, Victoria and Halifax had vacancy rates of 1% in 2019 while in Calgary and Edmonton they were 3.7% and 4.9%.) An average-priced bachelor apartment now goes for $933 a month while provincial disability payments for shelter are stuck at $497 a month. The emergency motion, spearheaded by a group of five Ottawa city councillors, has put a spotlight on these numbers, but the situation it describes will be familiar to many other cities.
Nationally, between 2006 and 2016, the number of actually affordable units on the market (renting below $750 a month) declined by 830,000, according to data from the Canada Mortgage and Housing Corporation (CMHC) Rental Market Survey and the 2011 National Household Survey. In a 2017 paper, Steve Pomeroy, a senior housing policy consultant, noted that new additions to Canada’s rental stock over that same period were typically priced at 140% of the average market rent and therefore did not contribute to the affordable housing supply.
Existing stock is also disappearing fast. Landlords use tactics like personal-use evictions, above-guideline rent increases, “renovictions” (where tenants are removed to upgrade a unit that becomes unaffordable to them when the renovation is finished), and will neglect to repair or maintain units to get rid of current tenants so they can relist the unit at a higher rent. These and other tactics help some landlords get around provincial rent increase guidelines, but they are not the primary driver of average rental price increases. There are simply not enough affordable rental units to go around.
What is core housing need?
Core housing need happens when:
Source: Understanding core housing need, Canada Mortgage and Housing Corporation
A 2019 study by David Macdonald for the Canadian Centre for Policy Alternatives, titled Unaccommodating: Rental Wages in Canada, put the affordability crisis into a context everyone can understand. Macdonald set out to determine the minimum hourly wage a person would have to make in order to comfortably afford to rent (using no more than 30% of their income) a one- or two-bedroom apartment in nearly 800 neighbourhoods within Canada’s major cities. The answer: $22.40 an hour for a two-bedroom apartment and just over $20 an hour for an average one-bedroom unit.
These “rental wages” are at least $5 an hour more than the highest provincial minimum wage in Canada ($15 in Alberta). In most Canadian cities, including Canada’s largest metropolitan areas of Toronto and Vancouver, Macdonald found there are no neighbourhoods where it is possible to afford a one- or two-bedroom unit on a single minimum wage, and even people earning much more than that will struggle to find a home they can afford.
Not only is there a woefully inadequate supply of affordable rental stock, but what little stock is available is eroding at alarming rates. CMHC data from 2011 and 2016 show that for every new affordable unit constructed in Ottawa, seven are lost to demolition, reconstruction or raised rents. Slowing and offsetting this erosion will be key to solving Ottawa’s housing affordability crisis and meeting recent federal targets, in the National Housing Strategy, for reducing chronic homelessness and renter housing needs by 50%.
As you might expect, these targets are easier to set than they are to meet, especially with existing affordable housing frameworks and plans at the local and provincial levels. That’s why Ottawa’s downtown city councillors went looking for new ideas as part of their housing emergency motion.
Based on his work at the Centre for Urban Research and Education, they commissioned Pomeroy to produce an in-depth analysis of Ottawa’s 10-year housing and homelessness plan and to suggest new targets and actions the City could take to get back on track. If there is an underlying message to Pomeroy’s study, it is that we cannot rely on the private sector to build all the affordable units we need.
“The private sector is not going to get us out of our housing emergency,” said Ottawa-Centre Councilor Catherine McKenney when I spoke to her in March. “When we talk about affordable housing, supportive housing, social housing, we can’t look at a profit margin. We have to look at a health, social service margin. We have to make sure people are well taken care of and once you put profit into that you will lose that.”
Not only must cities figure out ways to prevent the erosion of existing housing stock—“so that we aren’t losing that affordable stock as property owners and landlords renovate and push out tenants,” said McKenney—but also how to drastically increase the construction of new affordable rental units, preferably by public or non-profit actors and in combination with provincial and federal rental assistance programs, so that people can afford to pay for their homes.
Though Ottawa council is discussing new rental replacement policies and inclusionary zoning rules for affordable units (more on these below), the trick to achieving a more sustainable housing sector, according to Pomeroy, will be to make it easier for non-profits to compete with private developers. That could be done by encouraging and supporting (with financing) non-profit actors to bid on and win contracts to construct and manage mixed-income communities.
We can compare the breakeven rents—the rent needed to cover operating costs, mortgage payments and return on equity—of private builds versus non-profit builds to show why this makes sense. According to a 2019 study prepared by Coriolis Consulting, which outlines strategies for facilitating affordable rental construction in Vancouver, the breakeven rate on private one-bedrooms is between $600 and $1,000 more per unit, depending on the type of unit, than a similar unit built as a non-profit. And of course it would be: no profit, no extra costs to renters or the city.
However, as Pomeroy told me in March, for non-profits to build and maintain affordable housing, they need land, financing and rent supplements. He pointed to Vancouver’s Supportive Housing Strategy as an example of how it could work. In 2007, the City of Vancouver purchased one and leased 11 City-owned sites to non-profit housing sponsors for 60 years, at nominal prepaid rents, for the supply of supportive housing to people who require social supports, such as mental health care or substance abuse counselling, on site.
“That way,” Pomeroy said, “the City continues to own the land, but the non-profits get to lease it for a buck instead of paying full price.”
Once those sites were leased to the non-profits, Vancouver was able to set up a land trust and transfer those properties so they could be held in perpetuity as affordable housing. It is the land trust aspect of the Vancouver plan that McKenney said she will push in Ottawa, where the City has recently identified 18 parcels of land deemed suitable for mixed-income developments.
McKenney’s housing emergency motion is asking council to look at setting up a land trust to hold those lands for non-profit housing developers. But the discussions are moving slowly and there is a risk that private developers will purchase the lands before a trust can be established.
“We’ve seen it happen before where lands have been identified for non-profit and then have been sold by the City,” she told me. “There is absolutely no reason to think that it wouldn’t happen again.”
Building new developments on unused land is important for increasing affordable stock, but it is a very costly thing for non-profits to do. Building takes time and does not stop the erosion of existing affordable rental stock through raised rents. Helping non-profits acquire existing moderate-rent properties so the rents cannot be raised is one way to preserve existing affordable stock.
“What we can do is we can enable the non-profits to behave like private capital funds and real estate investment trusts,” Pomeroy said, suggesting that the way to do so is through an acquisition fund.
The problem is, current federal programs, through the National Housing Strategy, aren’t configured to enable acquisition—they focus on creating new supply and retrofitting existing social housing. And even if these programs did fund acquisition, it takes time to access government funding. When existing properties come on the market, they can be sold within 30 days, making it easy for wealthy private developers to snap them up.
“It's very, very difficult for the non-profits to compete with that,” Pomeroy said. “We need to…create an intermediate step, some kind of an acquisition fund that could help the non-profits go and buy that property.”
Pomeroy is working on a concept called a revolving loan fund. It would encourage social impact investors and foundations to invest in a fund that would help provide the non-profit housing sector with the capital needed to buy properties. The City of Toronto simply used its own funds to help small non-profits buy existing rooming houses, but that money was given away as a grant.
“When you give it away as a grant, you can only spend it once,” said Pomeroy. “In a revolving loan fund, you can keep spending that money over and over again.”
With Pomeroy’s setup, when a building comes on the market, non-profits could then borrow from the revolving loan fund to supplement their bank loan, and in a few years the fund would get its money back with a modest return. That money could then be spent on another building, and the returns on that building then allow the acquisition of yet another property.
“For all the reasons we know now about the erosion issues and the commodification and the financialization of housing, giving the assets to private developers is not going to preserve affordability in the long run,” he said.
Though policies like inclusionary zoning and rent controlled for income incent private developers to include moderately lower-rent units (at or slightly below market rents) in their developments, these units are not actually affordable in most cases. Rental support subsidies and housing allowances for low-income renters can help bring costs down. But with an estimated 2.4 million Canadian households experiencing core housing need in 2020, according to Macdonald’s assessment, many middle-income households also struggle to find rentals for reasonable prices.
In Ottawa, for example, most new developments rent at up to 180% the market price. Non-profits provide much lower rent-geared-to-income housing. This leaves a gap in the intermediate housing market that could be filled by non-profits—as long as they can find a way to make it cost-effective.
Source: The Rent is Due Soon: Financial Insecurity and COVID-19, Ricardo Tranjan, CCPA, March 2020.
Building and maintaining affordable housing is incredibly difficult for non-profits because deeply affordable units don’t generate enough rent to operate very well, said Pomeroy. “You can’t get the funding to make the program work with 100% really-low-income-targeted [units].”
The way to get around this constraint is to incorporate some units at intermediate rents, from $1,400 to $1,500 a month. This ensures the non-profit builder is stronger financially and at the same time provides housing for middle-income individuals who exist within that intermediate gap—unable to afford 180% market rent, but not in need of deeply affordable housing.
There are considerable spinoff benefits to this model that make it more attractive than status quo inclusionary zoning. Having high- and low-income tenants living in the same community helps create a sense of interconnectedness and merges the worlds of people who typically live in very different neighbourhoods, for example. McKenney said this is especially beneficial for children because they all get exposed to the same opportunities—opportunities not always available in the more isolated Ottawa Community Housing neighbourhoods. “We all need to grow up together,” she said.
On top of the financial hurdles to a larger non-profit role in affordable housing management and creation, there are the bureaucratic barriers. Currently, as soon as a call for applications goes out, every non-profit in the city puts precious time and money into creating a proposal only to have it turned down because there are eight other organizations applying for the same project. For non-profits with limited staff and resources, $50,000 per application is a significant loss.
Pomeroy said a better system could involve asking for expressions of interest instead of putting out a full request for proposals to begin with. Interested groups could then be evaluated according to their ability to develop and manage the project, and then be put on a list for when opportunities arise. Eliminating this competition between non-profits not only saves them time, energy and money, but also helps ensure they are well-equipped to take on the development.
For many housing experts, however, nonprofits are the second-best option, and under current funding conditions not a very good one at that. In early April I spoke to Shauna Mackinnon, associate professor and chair of urban and inner-city studies at the University of Winnipeg and former director of the CCPA-Manitoba, who told me public housing is the most effective way to provide deeply affordable housing to as many people as possible, but there is poor public perception of these programs.
“The public model has been far from perfect, but that’s not because its public—it’s because we’ve starved it,” she said. There have not been any significant new additions to public housing stock in decades and what little stock exists is often in poor repair and typically goes to people in most desperate need. This feeds into the notion of public housing as ghettos, she said.
“The only reason why people get ghettoized in public housing is because there’s not enough public housing. If we had more public housing you would have more variety of people, maybe with low income, but a greater variety of people, not just the most destitute with the most complex lives.”
Nonprofits providing deeply affordable rent-geared-to-income housing require a government subsidy to be able to provide that affordability and still cover their operating costs. For many non-profits these subsidies come from bilateral agreements involving the federal and provincial governments that were signed 35 to 50 years ago and are in many cases about to expire.
According to Sarah Cooper, assistant professor in the Department of City Planning at the University of Manitoba and a CCPA-Manitoba research associate, governments are in no mood today to renew those subsidies, based on a misplaced belief that with mortgages paid off, the nonprofits will be able to maintain the affordable housing on their own. In reality, without those government subsidies many nonprofits have to price some units at market rent or convert to mixed-income communities to make ends meet, which results in the loss of invaluable rent-geared-to-income units, Cooper told me.
Another, more fundamental problem with relying on nonprofits, according to MacKinnon, is their relative lack of transparency and accountability compared to government-run public housing. Nonprofits may or may not be democratically run; some will want to “honour the spirit of housing that is rent geared to income, but they may not, and they may not even actually have any choice because they need to survive as well, so without deep government subsidy they may need to set rents at the market rate.”
Seen from this perspective, the federal and provincial downloading of housing responsibilities to the nonprofit sector is a contributing factor to the affordable housing crisis, not a reality housing advocates need to grudgingly work within. “Their (governments) goal is to basically get it out of their hair and let somebody else deal with it,” MacKinnon said.
Shortly into the COVID-19 crisis, the federal government asked banks to provide some mortgage relief to struggling households; by April, more than 600,000 homeowners had filed applications. Meanwhile, rental relief has been mixed across the country.
Admittedly, homelessness and housing poverty is a more complex problem involving multiple levels of government. But as we throw away the standard policy playbook to deal with the coronavirus’ fallout, and find hundreds of billions of dollars to support struggling businesses and workers, has there ever been a better moment to come together, with some new and some old ideas, to fix Canada’s decades-long affordable housing crisis?
There are good options out there already that Ottawa and other cities can adopt, now and with federal and provincial support, to offset the erosion of affordable housing stock. According to Pomeroy, Ottawa is $22 million short (for 2020-21) of being able to meet its goal of reducing core housing need by 50% and eliminate chronic homelessness by 2024. That amount is an insignificant fraction of what the federal government has put aside so far in emergency benefits programs and tax deferrals.
“Less than 1% of all federal program expenditures are allocated to housing. And if housing is a basic human need, a basic necessity, a human right, then we should be putting more resources to addressing it,” said Pomeroy, adding that if everyone from big city mayors to advocacy groups collectively ran the same message, federal funding increases would follow.
“If anything positive can come from this it will be people understanding that we’re going to get out of this thing because of public investments, because the government is spending a tonne of money right now,” said MacKinnon. “That’s what we need people to start seeing, because its only public pressure that’s going to push us in a different direction…. The reality is we don’t have enough supply that’s low cost for people. And the best way to do that is through the public service.”
As the pandemic continues to unfold, more Canadians will see the disastrous effects of this long-term housing crisis firsthand. The federal government, working with the provinces, territories and municipalities, has a perfect opportunity to fund and prioritize affordable housing, so that future economic shocks are easier to absorb for everyone.
Natasha Bulowski is apprenticing at the Monitor from Carleton University's School of Journalism and Communication, where she is completing a degree in journalism and human rights.