Canada’s federal, provincial and territorial housing ministers meet today for the first time since September of 2005. After that meeting, the ministers issued a joint communique promising that they were accelerating work on developing a comprehensive Canadian Housing Framework to address the needs of the four million Canadians who are officially classified as being in “core housing need” and the 300,000 or more Canadians who will experience homelessness annually.
Despite that welcome promise almost three years ago, no progress has been made on a comprehensive framework and plans for a Canadian Housing Framework are apparently not even on the formal agenda of the today’s housing ministers’ meeting. Federal housing minister Monte Solberg wants to talk about tax cuts, and the provincial and territorial ministers want to talk about the expiry of funding for all three national housing and homelessness programs during this fiscal year.
Canada has a long history of using tax-based measures to deliver affordable housing, and that history is mostly one of failure. In 2003, TD Economics, in its major review of affordable housing, devoted several pages to a detailed examination of a series of tax measures to stimulate affordable housing. The conclusion from the senior economist of one of Canada’s largest banks:
“In conclusion, tax changes are unlikely to bring the biggest ‘bang for the nuck’ to affordable housing. Some of the provisions, such as the capital tax and the distortion between property taxes on rental and owner-occupied buildings, should be fixed on their broad merits. The other recommendations would no doubt increase the supply of rental housing, but the benefits would be diluted across the full spectrum of housing and have a limited ‘trickle down’ effect to affordable housing. A greater benefit-cost ratio could be realized through initiatives to directly target the lower cost segment of the market.”
In plain language: Tax cuts to stimulate new affordable homes aren’t particularly efficient and there are much better policy options, such as direct investment in new affordable supply.
Canada has a long history of tax measures that tweak around the edges of private markets in an effort to create new affordable homes, and that history is largely one of failure. Tax incentives such as the MURB scheme about two decades ago were very costly, and they didn’t deliver the affordable homes that Canadians so urgently needed.
Meanwhile, the imminent expiry of funding for all three major federal housing and homelessness programs (affordable housing investments, the national housing repair program and the national homelessness strategy) in the current fiscal year comes at the same time that overall federal investment in affordable housing is locked into a steady annual decline.
The “step-out” of federal housing dollars started with a decision by the federal governent i 1996 to transfer administration of federal housing programs to the provinces and territories. At that time, Canada became the only major country in the world without a comprehensive and properly funded national housing strategy.
The federal withdrawal from housing at a time when the nation-wide need for affordable homes remains deep and persistent.
Canada Mortgage and Housing Corporation , the federal government’s housing agency, estimates that its funding for affordable housing will drop by almost $100 million over the next five years and the number of households that it will assist will drop by almost 30,000. All this at a time when CMHC projects that its annual operating profits will increase to $1.3 billion and its total equity will grow to $11.9 billion.
One final note: as the Wellesley Institute’s National Housing Report Card (released in early February of 2008) shows, a number of the provinces don’t come to Ottawa with a strong record of investment in affordable housing. Most provinces have failed to meet the affordable housing commitments that they made when they signed the Affordable Housing Framework Agreement of 2001 (and the federal government has fallen short of its promises, as well).