Housing and Housing Policy

Housing and Housing Policy

Shelter is a basic human need. The amount, type and cost of housing describe the "supply" side of the housing market. The number of households, their income and housing requirements describe the "demand" side of housing. In Canada, generally those who can afford to buy housing do so - in part to provide security of tenure and in part as an investment. Across the country, 70% of Canadians own and 30% rent their housing.

Canadian housing takes many forms. More than half of Canadian homes are single-family detached houses; 17% are other ground-oriented forms such as row houses, duplexes, semi-detached or movable; 18% are lowrise apartments and 10% are highrise apartments. The vast majority of Canadian housing has been built since the Second World War. Consequently, the quality of Canadian housing reflects its recent construction, with less than 6% of homes requiring major repairs.

Across Canada, construction averaged only 39 000 units per year during the Great Depression and the war years. It increased rapidly after the war to meet the needs of returning veterans, immigrants and people moving from rural to urban centres. Annual additions to Canadian housing averaged 77 000 units in the 1950s, 155 000 in the 1960s and 229 100 in the 1970s. The early 1980s saw a reduced demand for housing as a result of an economic recession and declining demand as most people born during the postwar baby boom had already entered the housing market. Through the 1990s annual housing completions averaged 145 000 units, responding to immigration, increasing incomes of aging baby boomers (9% of whom have purchased a second home) and baby boomers' children entering the housing market. During the early 2000s annual completions increased to an average of 212 924 units per year but dropped in 2008 as Canada experienced the worldwide economic recession.

In theory, as wealth increases and households age, people seek newer accommodation, freeing up older homes for first-time buyers. However, in metropolitan areas experiencing rapid growth, the trickle down process does not work. A system that provides wealth for some may make housing less affordable for others. The cost of housing is part of a broader concern for affordable living that incorporates the full range of costs a household faces. In metropolitan areas the majority of new development is still in the suburbs on "greenfield" sites which require owners to maintain several cars and pay higher taxes for services.

The housing market is the most complex urban system people experience on a daily basis. For owners, as house prices rise, household wealth increases. Many owners see their home as their retirement savings plan. From 1999 to 2005 the real median net worth of owners rose 27%. By contrast, the median net worth of renters dropped 5%. However, the housing market is cyclical and in uncertain economic times owners may experience a loss of value in their house and face the challenge of making mortgage payments. The flip side of declining house prices is the opportunity for employed renters to purchase a home.

The challenge facing those who cannot afford to buy housing is that the stock of rental housing is declining. Typically more than 90% of new housing is built for ownership. While some units are temporarily rented by their owner, most are owner occupied. With few new units being added to the rental stock, affordable housing is becoming a scarce resource for lower income Canadians. Low vacancy rates compound the challenge of finding affordable housing. While national average vacancy rates are 3%, this masks the problems of very low vacancy rates in large cities such as Vancouver and Toronto. Those unable to afford ownership seek a variety of other options. Some stay with parents or family members; others find roommates to share housing costs.

Co-operatives and co-housing provide accommodation with security of tenure to households that share costs. Co-operatives reduce housing costs by sharing expenses and management. Housing co-operatives in Canada date back to the 1930s. There are 100 000 units of co-operative housing in Canada. Housing costs are further reduced when residents share some facilities (such as kitchens and living rooms) by living in co-housing.

Market rental housing refers to housing built and managed by private entrepreneurs. Market units include purpose-built rental buildings, units temporarily rented by their owners and secondary/ancillary suites (often called "mortgage helpers") in single-family homes. Residential hotels offer lower rent single-room occupancy (SROs), where tenants share bathrooms and have limited cooking facilities in their rooms.

Most occupants of market rental housing receive little or no assistance from governments to pay their rent. Help is limited to rent supplement programs such as British Columbia's Shelter Assistance for Elderly Renters and the housing component of social assistance. When other options fail, people seek housing in the small number of government-funded social housing units or find themselves part of the growing homeless population.

Government Programs to Increase Housing Supply and Affordability

Over the years governments have intervened in the housing market to stimulate the economy and assist people in need. Adequate housing refers to housing that is in good physical condition, has adequate bedrooms and costs less than 30% of before-tax household income. Those living in poor-quality housing and/or spending more than 30% of their income are said to be "in core need."

The phrase core need was developed by Canada's national housing agency, Canada Mortgage and Housing, to better understand the needs of those requiring assistance. Across Canada, about 14% of households are in core need. Most are renters. Only a few people remain in permanent core need. Others experience temporary need when they move or their family circumstances change through birth of children, death of a spouse or divorce. The most serious need is found in metropolitan areas, where many renters spend more than half their income for housing.

Housing policies and programs are actions taken by governments to improve the quantity and quality of housing and to reduce its cost. The objectives of Canadian housing policies are to ensure that dwellings of a decent standard are available to all Canadians at prices they can afford. Over the years, government assistance has been provided through a variety of grants and loans to developers or consumers.

All levels of government have been involved in housing programs, though the constitutional authority for housing is vested in provincial governments. They, in turn, may delegate housing responsibility to regional and city governments.

At the national level, a variety of economic and social concerns such as the Depression had an impact on the housing sector and caused the Government of Canada to become involved in housing policy. Canadian housing policies have addressed 3 issues: assisting the housing market to produce enough housing to meet the needs of most Canadians (see Development Industry), providing mortgage assurance for homeowners and offering assistance to people whose housing needs cannot be adequately met through the private housing market.

Before 1970, Canadian housing programs were almost exclusively the preserve of the federal government. The first national housing legislation, the Dominion Housing Act of 1935, provided $20 million in loans and helped finance 4900 units over 3 years. The Federal Home Improvement Plan (1937) provided subsidized interest rates on rehabilitation loans to 66 900 homes. In 1938 the first National Housing Act (NHA) was passed. These acts served the dual purposes of providing housing and creating employment opportunities.

The federal government continued to be active in the housing market during the Second World War. A Crown corporation, Wartime Housing Corporation, built 45 930 units at a cost of $253 million over 8 years and assisted in the repair and modernization of existing houses. New programs stimulated the private housing market by providing mortgage money and favourable interest rates to encourage homeownership and the construction of limited-dividend rental housing. In 1946 the assets of Wartime Housing Corporation were transferred to Central (later Canada) Mortgage and Housing Corporation (CMHC).

A significant milestone in Canadian housing legislation occurred in 1954 when the federal government agreed to insure mortgage loans made by private investors against borrower default. The Bank Act was also amended to allow Canada's chartered banks to lend money for mortgages. These initiatives enabled the federal government to reduce its direct involvement in lending and to become an insurer of mortgages and a lender of last resort.

The provision of housing for lower income Canadians has been another continuing concern of governments. Social, public, community and non-market housing are terms used interchangeably to describe housing for people whose needs for adequate and affordable shelter cannot be met through market housing. Non-market units are funded and managed by governments and non-profit and co-operative societies to provide affordable housing. The first Canadian social housing legislation was introduced in 1938 when the NHA made provision for construction of low-rent housing. In 1949 the NHA was broadened to include federal-provincial programs (sometimes with city participation) to fund publicly owned and provincially managed housing for low-income families, seniors and the disabled. Prior to 1970, government programs assisted one-third of all housing starts. Most of this assistance was directed to market housing. Less than 5% of all starts were specifically designed to house lower income Canadians.

From 1969 to 1974 public housing programs underwent extensive evaluation. A $200 million program in 1970 stimulated innovative solutions for housing low-income Canadians. In 1974 the NHA was amended: existing public housing was to continue to provide accommodation for low-income households; rural and First Nations programs were added; and new social housing was to be built by municipalities, non-profit organizations and co-operatives. The legislation encouraged consumers to be more involved in the design and management of housing and encouraged a mix of modest and lower income households. The federal government was the main source of funding for social housing, with some assistance from provinces and cities.

During the 1970s the federal government continued to assist the private housing market by insuring mortgages and providing direct loans in smaller communities that were otherwise not well served by private lenders. Incentives introduced to stimulate home ownership were tax-exempt registered homeownership savings plans, an assisted homeownership program and changes to the Tax Act (1971) that excluded principal residences from capital gains tax. The federal government assisted the construction of private rental housing through a combination of grants, preferential loans and taxation concessions (multiple-unit residential-building deductions, the assisted rental program and a rental supply plan). Government programs assisted 40% of all housing completions.

Throughout the 1970s provincial and city governments assumed a more active role in housing. Prior to 1970 Ontario had the most active provincial housing agency. By the mid-1970s all 10 provinces had created new or stronger housing departments and assumed more responsibility for policy development and for setting priorities for spending housing funds. Most provinces offered home-ownership grants and funded non-market housing. Some provinces assisted renters by providing tax credits, shelter allowances and rent control. Amendments to the NHA in 1978 and negotiations surrounding the Constitution Act, 1982, supported provincial housing activities, and, in turn, senior governments encouraged cities to create municipal non-profit corporations to build and manage social housing.

From 1947 to 1986 there were 253 500 public housing units built across Canada. Ontario had the largest share (43%), followed by Québec (22%), British Columbia (8%), Manitoba (7%) and Alberta (5%). The location of public housing reflects the extent to which provincial governments participated in cost-shared programs and in areas with traditionally low vacancy rates. Public housing, managed by government, primarily houses seniors, families and others with housing and support needs.

Between 1974 and 1986 governments shifted to funding non-profit groups such as churches, co-operatives and municipalities in order to provide affordable housing. More than 220 000 units of non-profit and cooperative housing were provided to house families (50%), seniors (40%) and others (10%). (See also Indigenous People: Government Programs).

In the early 1980s the Canadian Home Stimulation Program provided grants to home buyers; the Canada Mortgage Renewal Plan assisted those who were experiencing difficulty renewing their mortgages at higher interest rates; and the Graduated Payment Mortgage Plan helped homeowners offset the rising costs of home ownership by lowering initial monthly mortgage payments. In 2008 new initiatives allowed investors in small rental projects to purchase properties with no money down.

Social housing programs underwent an extensive review from 1979 to 1984. Coinciding with fiscal restraint both to eliminate the operating deficit and reduce the national debt, governments examined the ongoing cost of housing subsidies. Housing funds were reduced and directly targeted to low-income people. More emphasis was placed upon renovation of existing housing.

Most market rental-assistance programs ended by the mid-1980s, but CMHC continued to assist more than 12 800 households annually to improve housing quality through a variety of rehabilitation programs for homeowners, rental units, rental conversions and rooming houses in both urban and rural areas.

By 1993 the federal government withdrew from funding new social housing. In 1996 the federal government announced that the management and ongoing subsidies of existing social housing would be transferred to the provinces. Provincial contributions to housing varied across the country. For the most part, funding was uncertain and provided minimal support for those least able to afford housing in higher priced markets. Since 1995, British Columbia and Québec have been the only provinces funding new social housing. British Columbia provides limited funds for building independent living for frail elderly and other vulnerable populations and Shelter Aid for Elderly Renters to ease the cost of market rental housing.

With the withdrawal of most senior government funding for assisted housing, cities were faced with people in core need and few resources to respond. Cities provide some affordable rental housing through zoning-related actions such as limiting conversion of rental units to ownership, rezoning new sites for housing to deflect pressures from existing stock, permitting second units in single-family homes and funding tenant-assistance programs. "Carrots," such as bonus density to encourage developers to build affordable units, and "sticks," which require developers to include a portion of units as affordable housing, set conditions on new development. Zoning to permit infill of smaller homes in existing neighbourhoods provides some new ownership opportunities in areas with established services.

Declining support in the face of rising prices has led to an increase in the homeless population. Estimates of the national homeless population vary. As one illustration, in the Metro Vancouver area the number of homeless people increased from 300 to 1100 during the early 2000s. Many more have been identified as at-risk as the rental housing stock decreases and costs rise. Most of those in need benefit from a combination of housing and support services (health care and daycare), requiring partnerships between a variety of agencies. In the 2000s the federal Human Resources and Skills Development Canada and Supporting Communities Partnership Initiative provided some funds for shelters and transition housing to address homelessness

Supporting Housing Quality and Sustainable Cities

The housing industry is supported by a continuing commitment from all levels of government to improve housing quality and community standards. The National Building Code and the National Fire Code encourage uniform building and safety standards across Canada. Local governments are usually responsible for enforcing adequate housing standards and for land-use planning that affects the location and type of housing (see Urban and Regional Planning; Zoning).

Municipalities are also responsible for planning and for providing water, sewer, roads, parks, schools and other public services. In unincorporated or rural areas, regional districts or provincial governments regulate land use and provide services.

Government programs have assisted cities in improving the quality of housing and services. During the 1950s the federal government funded land assembly programs. In the 1960s cities received funds for urban renewal and municipal infrastructure. During the 1970s the federal government shifted funds into residential rehabilitation assistance, home insulation and neighbourhood-improvement programs. Most cities used the neighbourhood-improvement program to upgrade and preserve older neighbourhoods.

Following withdrawal of federal funding for new supportive housing, the national government remained active in supporting the mortgage market (for both homeowners and investors) and research. Partnerships such as the ACT (Affordability and Choice Today) program - sponsored by the Federation of Canadian Municipalities, Canadian Home Builders' Association, Canadian Housing and Renewal Association and CMHC - provide grants to municipalities, builders, housing agencies and developers to demonstrate innovations in housing, planning, design and construction technology. These are published and shared within the housing industry. The Canadian Centre for Public-Private Partnerships brings together public, private and third-sector agencies to provide cost-effective housing for low-income households.

In the 2000s federal housing initiatives focused on sustainable designs to reduce demands for energy and lessen emission of greenhouse gases. Example programs include the federal Equilibrium Sustainable Housing Demonstration Initiative to promote healthy, affordable, sustainable, energy-efficient housing. Governments encouraged the building of more compact urban areas by permitting infill housing in existing neighbourhoods, redeveloping "brownfield" (old industrial) and "greyfield" (low-density commercial) sites and encouraging more housing close to downtown jobs and transit-oriented development as ways to make more efficient and sustainable use of land and services.