The Housing Crisis: One More Kick at the Can
The federal government has no shortage of initiatives designed to solve our housing sorrows. For the record, those programs include:
Affordable Housing Fund (AHF)
Canada Greener Affordable Housing (CGAH) Program
Canada Housing Benefit (CHB)
Sustainable Affordable Housing (SAH) Initiative
Affordable Housing Innovation Fund
In fact however, none of them has made a substantial dent in the actual availability of affordable housing for actual Canadians. If anything, as I’ve previously written, the regulatory complexity of the programs have very likely made things a lot worse.
So I’m approaching news of Prime Minister Carney’s new $13 billion Build Canada Homes program with some skepticism. Granted, not a lot of hard details are available yet. But I think it’ll be worth assessing the little that we have been told.
$1.5 billion fund to buy at-risk rental buildings
Why are buildings “at-risk” in the first place? A lot of it is probably due to current owners considering converting their buildings to luxury condos, higher-rent units, or non-residential uses.
But the condo market in large Canadian cities is in the middle of a catastrophic meltdown featuring thousands of unsold and unfunded pre-construction units. And that - at least in part - is driving rental prices down. Add to that the fact that the most recent available data shows an oversupply in the apartment rental market with vacancy rates in metropolitan areas at their highest levels since 2017.
That’s not to say that there’s no role for governments to play in stabilizing rental markets. But those markets change quickly and governments move slowly. I see a significant risk that the kind of mega projects proposed in this policy could simply fail to address the underlying business factors driving shifts in building management. In many cases, those factors won’t disappear just because there’s public money involved.
Flexible financial incentives
Those incentives probably mostly refer to low-cost guaranteed business loans and tax credits. I’m all for strategic tax credits, but I’m really not sure about the wisdom behind flooding the investment market with easy financing.
In fact, throughout North America, there was loads of free capital available for most of the past decade, but it did nothing to resolve affordability and availability problems. And tying such resources to actual grants risks encouraging projects with weak chances of success (or out-and-out scams).
Factory-built, modular, and mass timber construction
Modular construction does offer benefits, including the potential for faster completions, centralized quality control, and lower onsite labour costs. But it comes with a very long - and complicated - supply chain.
Just imagine, for instance, how much fun you’ll have moving thousands of oversized loads across already-congested highways. And processing a warranty claim after you’ve suffered moisture damage during the storage or transport stages can also be an exciting and rewarding new hobby.
It’s also important to keep in mind that externally sourcing modules can complicate local zoning approvals. In some cases, the municipalities in charge might not even have addressed this kind of construction. This will require close coordination between levels of government, which hasn’t been Canada’s strongest historical asset.
What about mass timber construction? I certainly can’t casually dismiss the goal, but there are some serious considerations, including:
Higher upfront material costs
Limited supply chains (which means delayed project completions)
Poor noise insulation
Potential for water damage over time
Potential for warping during construction
Use of domestic lumber, steel, and aluminum
The vast majority of lumber, steel, and aluminum in Canadian housing construction is already domestic. I don’t see this as a particularly meaningful program goal.
Sustainable building methods
As I’ve written previously, adding “sustainability” to construction requirements can easily add 50 percent to your building costs (over and above a regular code-compliant project). That is to say that, as desirable a goal as sustainability is, it’s simply not compatible with affordability.
Having said all that, objectives like opening up development access to federal land and reducing regulatory delays for new construction are excellent in and of themselves. But at this point, I’m unconvinced that there’s anything in this new program that’s likely to be substantially more effective than all the previous programs. And I’m far from convinced that any of this will make much of a difference for Canadians struggling to find an affordable place to live.
Know someone who could add to this conversation?
Check out some of the other housing-related posts on The Audit:
How Governments Could Actually Help Home Construction
We’re all agreed that there’s a housing crisis in Canada. And there’s a fairly broad consensus on at least some of the contributing factors, including out-of-control immigration and weak construction numbers. But I, for one, don’t think that anyone has yet presented a solid, comprehensive solution - including the Liberal campaign’s truly terrifying proposal to pour billions of dollars into building and managing public housing (on top of the billions of dollars they’ve already fruitlessly sunk into programs like their National Housing Strategy Act).
So What ARE We Supposed To Do With the Homeless?
Sometimes a quick look is all it takes to convince me that a particular government initiative has gone off the rails. The federal government’s recent decision to shut down their electric vehicle subsidy program does feel like a vindication of my previous claim
Solving the Housing Affordability Crisis With This One Cool Trick
The Audit has a growing library of posts addressing the housing crisis. I’m particularly proud of my Solving Canada’s Housing Crisis because of how it presents a broad range of practical approaches that have been proposed and attempted across many countries and economies. But the truth is that the
