The Liberals have spent a lot on improving housing affordability, but still come up short

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Housing continues to headline conversations during the federal election campaign, with the incumbent Liberals defending their record while the other parties point to metrics that indicate a worsening of affordability for homeowners and renters alike.

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Housing is a multi-jurisdictional responsibility, with subnational governments having a considerable say in how much rent landlords can charge and where and what type of new housing might be built. The federal role in housing is a supportive one and often subsidizes programs administered by other tiers of government, but it does have an impact on housing outcomes.

An August 2021 report by the Office of the Parliamentary Budget Officer (PBO) gives us a sense of whether the federal government has expanded the breadth and scope of its interventions in housing, and what impact it’s had in improving housing affordability.

The Liberal government’s response to deteriorating housing affordability was a multi-year $37-billion National Housing Strategy (NHS) that runs from 2018-19 to 2027-28. The NHS comprises several large and small initiatives that are administered by the Canada Mortgage and Housing Corp. (CMHC) and Employment and Social Development Canada (ESDC).

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In addition, the NHS includes $31.2 billion in new and existing loan authorities and $7.4 billion in matching funds from other tiers of government. These measures are not deemed budgetary costs to the federal government.

The NHS promised a significant jump in funding for housing affordability. At $3.7 billion in planned annual spending, the NHS outlay represented a 50 per cent increase (in nominal dollars) over the average annual expenditure in the 10 years before it was created. The funds administered by CMHC comprise the bulk (90 per cent) of the NHS’s spending and are focused on housing affordability.

The ESDC funded initiatives to address homelessness with an average annual outlay of $357 million. Compared to the 10-year pre-NHS average, the Liberal government increased funding for homelessness initiatives by more than 200 per cent. Almost six per cent of the planned spending of $3.7 billion per year has been dedicated to Indigenous housing needs.

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The federal government has substantially increased funding for housing, but the NHS has fallen short on executing some of the programs. For example, CMHC spent less than half the funding earmarked for the Rental Construction Financing Initiative and the National Housing Co-Investment Fund in the first three years of the NHS. This left $574 million unspent.

Some NHS initiatives also resemble pre-NHS programming. For example, the NHS allocated $2.4 billion per year for assistance with housing needs, which is only $192 million per year higher in nominal terms than the pre-NHS period.

On the other hand, the NHS prioritized capital contributions to assist with the construction of new affordable housing. It increased annual funding to $755 million between 2017-18 and 2027-28 for new housing construction, accounting for 77 per cent of the increase in CMHC’s funding.

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Interestingly, the NHS set aside significantly higher future cash outlays ($4.8 billion) for the fiscal year 2020-21, which coincided with the snap election. For 2022-23, by comparison, the planned funding will decline to $3.5 billion.

Despite the boost in federal spending on housing initiatives, the rapid increase in housing prices and rents year after year shows it has fallen short of making a meaningful difference to housing affordability. Consider that the number of households with core housing needs stands stubbornly at 1.7 million.

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At the same time, the federal mandate for housing is exercised in collaboration with provincial and local governments that add their own funds to support housing initiatives. The downside of measures contingent upon collaboration is that programs stall when consensus can’t be achieved.

For instance, the federal support for community housing depends upon bilateral agreements with the provincial governments. But the bilateral agreements expired and were not renewed in time, so the number of CMHC-assisted low-income community housing units dropped to 260,000 in 2018 from 435,450 in 2015.

The federal government’s spend of $3.7 billion per year on housing affordability equates to approximately $182 per month per household in core housing need. Yet the PBO estimates the affordability gap at around $8 billion per year for 2021-22 and rising in the subsequent years.

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The sustained decline in housing affordability in Canada suggests that more needs to be done and perhaps in a different way than what has been done to date. Recent efforts have maintained the status quo, so the increase in federal spending on housing has not moved the needle.

What is needed are bold, imaginative measures with an increase in spending on housing that is in line with the affordability gap identified by the PBO.

Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website, www.hmbulletin.com.