Canada faces a severe housing crisis. The federal government has unveiled two major housing initiatives in recent years, but neither has adequately targeted the “deeply affordable housing” that is required to end homelessness and inadequate housing among very-low- and low-income households. The best way to achieve this is a co-ordinated approach that combines mechanisms available to all levels of government. In addition, governments should adopt clear, consistent income-based definitions of “affordable” and “deeply affordable” housing across programs. This would allow governments to set clear priorities and would permit a stacking of government grants while enabling the monitoring of results against set targets.
The federal government has unveiled two major initiatives over the past six years aimed at encouraging more homebuilding. Yet most rental housing remains beyond the reach of many very-low-, low-, moderate- and median-income households in Canada. Homeownership is even more out of reach.
Neither plan adequately targets the “deep housing affordability” required to end homelessness and inadequate housing among very-low- and low-income households. I have estimated that three million households need deeply affordable housing supply and an additional 1.4 million need affordable housing supply.
Solving the Housing Crisis: Canada’s Housing Plan, released in 2024, contains some promising directions, including a proposal to use vacant and underused federally owned land for housing, new financing vehicles such as the Canada Infrastructure Bank to spur development, and enabling zoning and building-code changes to allow small apartment buildings in single-family neighbourhoods located near transit, jobs and services, as well as a pre-approved design catalogue of housing.
The challenge now is to ensure that these efforts are implemented in a way that prioritizes deeply affordable housing for very-low- and low-income Canadians.
The best way to achieve this is a co-ordinated approach that combines mechanisms available to all levels of government:
We have the tools to improve housing affordability for very-low- and low-income Canadians. Now it’s a matter of using them wisely.
Canada faces a severe housing crisis. An estimated 234,000 people are homeless in Ontario alone, the majority of whom have a disability and are reliant on social assistance or disability benefits (Pinkerton & Hauen, 2024).
Most rental housing is beyond the reach of many very-low-, low-, moderate- and median-income households. Homeownership is out of reach for all but higher-income households. The federal government’s National Housing Strategy, introduced in 2018, has so far failed to deliver on its 10-year targets for addressing homelessness and reducing core housing need — households in unaffordable, overcrowded or poorly repaired homes. Canada’s Housing Plan, released in April 2024, contains several initiatives that could expand housing supply, but doesn’t adequately target “deep affordability” (Government of Canada, 2024a).
In this paper, I argue that increasing the supply of deeply affordable housing will require all levels of government to work together, use a shared definition of affordability across their programs and implement complementary mechanisms targeted to those who need them most.
After a 25-year absence, the federal government re-entered the housing policy space with the launch of its 10-year National Housing Strategy: A Place to Call Home (Government of Canada, 2018). The plan included targets for reducing the number of households in “core housing need” — 1.7 million at that point — by 530,000. It also resolved to reduce an unspecified number of individuals in chronic homelessness by half. Despite the federal government’s stated commitment to achieve the “progressive realization of the right to adequate housing” (Government of Canada, 2019, preamble), numerous reports have concluded that the National Housing Strategy is not meeting its interim targets (e.g., Blueprint, 2022; Parliamentary Budget Office, 2021; Standing Committee on Human Resources, Skills and Social Development, 2023).
Only 4 per cent of homes created by its largest financing program — the $55-billion Rental Construction Financing Initiative (now renamed the Apartment Construction Loan Program) — are suitable for households in core housing need (Blueprint, 2022). This is because of a fatal policy flaw: programs contained within the National Housing Strategy have used widely divergent definitions of affordability, and the vast majority of the $89 billion in funding did not target the “deep affordability” required to end homelessness and inadequate housing in Canada among very-low- and low-income households.
The National Housing Strategy was followed in 2024 by Solving the Housing Crisis: Canada’s Housing Plan, which also fails to address the fundamental questions of who needs what kind of housing, where and at what cost (Government of Canada, 2024a). This paper will demonstrate why it is necessary to target housing subsidies to those who need them most, and how it is possible to combine policies that can result in deep affordability.
Currently the federal, provincial, territorial and municipal governments use varying definitions of affordable housing (see box 1). Canada Mortgage and Housing Corporation alone uses six different definitions of housing affordability across its programs (Whitzman, 2023). Successful housing policy requires all three levels of government to work together, using shared definitions and complementary mechanisms.
Federal action on housing from the 1940s to the 1980s was informed by income-based categories of housing affordability, which focused on low- and moderate-income households (Suttor, 2016). Housing is now so unaffordable that median-income households need to be included in affordable housing policy, while a new category of very-low-income households has emerged because of cuts to social assistance. As a result, I argue that there is now a need to distinguish “affordability” from “deep affordability” (see box 2).
In June 2024, the British Columbia government updated its state-of-the-art housing-need assessment template for all municipalities and regions (British Columbia Government, 2024a). These assessments are intended to guide local policies to reduce homelessness and deep housing unaffordability, the latter defined as spending more than 50 per cent of pre-tax household income on rent or mortgage costs plus utilities (British Columbia Government, 2024b). In B.C., an alarming one in four renter households spends more than half their income on monthly rental costs. Across Canada, the proportion is 16 per cent, or one in six (Royal Lepage, 2024). Spending more than 50 per cent of pre-tax household income means that money for other basic necessities such as food and transportation is limited, and health outcomes significantly worsened, especially for very-low- and low-income households (Smetanin et al., 2024).
A 2016 estimate of homelessness found that 235,000 people were homeless in Canada; this estimate has not been updated since (Dionne et al., 2023; Gaetz et al., 2014). There is no consistent or replicable way to track homelessness, an essential first step in ending the crisis (Dionne et al., 2023). In August 2024, the Ontario government estimated that there were 234,000 homeless people in that province alone, with 20 to 65 per cent of those being Indigenous (Pinkerton & Hauen, 2024). Eighty-five per cent of people who are homeless have a disability or severe health issue, and 70 per cent are reliant on income from social assistance or disability benefits (Government of Canada, 2023a). Across Canada, shelter allowances are inadequate to rent a room, let alone an apartment (Laidley & Tabbara, 2024). Almost four in five households in core housing need — those that rent or own unaffordable or otherwise inadequate homes and can’t afford better options in their communities — are in the lowest income quintile. Across Canada, these low-income housseholds can’t afford rents of more than $1,050 a month (Housing Assessment Resource Tools, 2024; see box 3).
Very-low- to median-income households include the majority of Canadians. If most Canadians can’t afford housing, Canada is truly in a housing crisis. And, indeed, all evidence points to a severe housing crisis.
The median asking monthly rent for all properties (studio to three-bedroom units) across Canada in August 2024 was $2,201 (Rentals.ca, 2024), requiring an annual household income of $87,200 to be considered affordable. The median before-tax household income based on 2021 census data was $84,000 (Housing Assessment Resource Tools, 2024). So most available rental housing across Canada is unaffordable to very low-, low-, moderate- and median-income households.
As for homeownership, the situation is even worse. Households need an annual income of over $200,000 to afford to buy a house in Vancouver and Toronto, and there is no major city in Canada where the area median-income renter household can afford to move into homeownership (statista.ca, 2024). Even Habitat for Humanity, one of the few national non-market developers, is forced to limit eligibility to its programs to median-income households in the Greater Toronto Area (Younglai, 2023) (see box 4). In the 1980s, first-time homeownership was affordable to moderate- and median-income households. Today, it’s affordable only to the top 10 per cent of income earners aged 25 to 34 (Whitzman, 2024).
The good news is that, according to the needs-assessment tool I helped create at the Housing Assessment Resource Tools project, almost 90 per cent of very-low-income households and two-thirds of low-income households consist of single people (Housing Assessment Resource Tools, 2024). That means that the production of deeply affordable new homes or the acquisition of existing homes to address and prevent homelessness can be focused on studio or one-bedroom apartments, preferably with generous indoor and outdoor common spaces (Happy Cities, 2022).
The bad news is that the 1.1 million low-income households and 350,000 moderate- and middle-income households in core housing need based on 2021 census data are a vast underestimation.
“I have estimated that three million households need deeply affordable new housing supply and an additional 1.4 million need affordable housing supply.”
The 2021 census was collected at a time when temporary COVID-era benefits had lifted at least 250,000 households out of the “core housing need” category (Statistics Canada, 2022). The census excludes student households from core housing need — and there are at least 2.2 million university and college students, most of whom are low-income renters (UTILE, 2022). The census also excludes “non-private households,” ranging from someone in a basement apartment without a separate entrance to group homes for people with an intellectual disability. It excludes those involuntarily living with families and roommates, even though this household type is the fastest growing in Canada (Statistics Canada, 2022). And it excludes families with young children moving out of large cities because there are no affordable housing options (Moffatt, 2021). Keeping these data gaps in mind, I have estimated that three million households need deeply affordable new housing supply and an additional 1.4 million need affordable housing supply (Whitzman, 2023).
Besides students, who are these people who need deeply affordable housing? (See figure 1.)
Is it even possible to create new homes for $1,050 a month, the threshold for affordability for very-low- and low-income people? Despite two federal housing strategies released over the past six years with $89 billion in funding, the federal government’s response to deep unaffordability has been lacklustre.
About 1,500 of the 41,500 units (or 3.6 per cent) created or under construction using the largest program in the 2018-28 National Housing Strategy, the Rental Construction Financing Initiative (now called the Apartment Construction Loan Program), are affordable to low-income households. This is partly because of the weak definition of affordability used by the program as well as unambitious targets: 50-year low-interest guaranteed financing to projects with a minimum of 20 per cent of units with rents at or below 30 per cent of median total income for all families in the area for 10 years. Using this definition, an affordable rent is higher than median market rent in most cities (Pomeroy, 2021).
The proportion of units affordable to low-income households is higher for the second- largest program, the $15-billion National Housing Co-Investment Fund (now renamed the Affordable Housing Fund): 35 per cent of the 30,000 funded units. However, two-thirds of the homes created by the program don’t address the stated targets of the strategy, which were to reduce the number of households in core housing need by 530,000 and to cut chronic homelessness by half. And yet another definition of affordability is used in this program: rents for a minimum of 30 per cent of the units must be less than 80 per cent of the median market rent for a minimum of 20 years. In many cities, even these so-called affordable rents aren’t affordable to low- and moderate-income households (Blueprint, 2022).
The only unilateral[1] program that was focused on low-income needs was the Rapid Housing Initiative, and this was a late introduction (in 2020, two years after the National Housing Strategy was announced), with year-by-year instead of continuous funding. It set a target of 15,500 homes and provided $4 billion in grants over three rounds of funding (Canada Mortgage and Housing Corporation, 2022b). However, this program was aimed at individuals who are chronically homeless, most with moderate to severe health and disability issues. The program’s required matching of provincial support through rent supplements and social and health services for people with disabilities has been difficult to obtain, delaying many projects (Al Mallees, 2023; Oudshoorn et al., 2022).
Canada’s Housing Plan of 2024 is a reset of the National Housing Strategy, and contains some promising directions (Government of Canada, 2024a). The plan pays greater attention to what has worked in the past in Canada and what currently works to increase low-cost housing in other countries. Many of the ideas in the plan echo those in Affordable Housing Reboot: Bring Back Federal Leadership by the Affordability Action Council (2023) and proposals from other housing policy advocates (Canada-British Columbia Expert Panel on the Future of Housing Supply and Affordability, 2021; Canadian Housing and Renewal Association, 2022; Richter et al., 2023; Task Force for Housing and Climate, 2024).
While there is no magic bullet to cure our affordable housing woes, there are three potential game changers contained in Canada’s Housing Plan, which, if combined, could help scale up deeply affordable housing: land-use changes, new financing options and adopting innovative construction solutions.
In recent years, several European cities have unveiled innovative housing developments on government-owned lands. Aspern Seestadt, a half-hour from central Vienna, is a former airport that is being developed to house 25,000 residents. A train station and rapid bus transit are already in place in this walkable “eco-district,” as are schools, community centres and green spaces (Aspern Development AG, n.d.). The project is led by Vienna’s public-housing developer, Vienna Wohnfonds, which has successfully created two- and three-bedroom family-sized apartments renting for C$1,700 a month, and furnished student residences for under C$1,000 a month.
Similar large-scale sustainable transit-oriented projects, pioneering innovative carbon-neutral construction methods, are being created by municipal developers: Kalasatama, in Helsinki, with 25,000 residents in a former industrial port; Jernbanebyen, in Copenhagen, with 10,000 residents in a former railyard; Mitte Altona, in Hamburg, with 5,000 residents in a former railyard; and many more (City of Hamburg, n.d.; My Helsinki, n.d.; ubm magazine, n.d.).
Here in Canada, many people have advocated for a return to large-scale non-market development on government land, a feature of Canadian housing policy from the 1940s to the 1980s. Although providing grants or low-rate financing adds to federal debt or deficits, improving an existing asset such as well-located land by building housing and other uses adds to Canada’s collective wealth (Meredith & Broadbent, 2023). Using non-market developers — public (e.g., a municipal housing company, the Canada Lands Company), co-operative and community builders — can reduce rents by 43 to 49 per cent and maintain affordable housing in perpetuity (as opposed to the 10- to 30-year affordability agreements attached to National Housing Strategy programs).
In 2021, the estimated break-even rents on government-contributed land with no additional subsidy in Metro Vancouver were $1,273 per month for a one-bedroom, $1,641 for a two-bedroom and $2,009 for a three-bedroom apartment, all within the affordability range (Lee, 2021). Rents could be brought even lower through reduced parking requirements, upfront grants to subsidize deeply affordable units or by cross-subsidizing deeply affordable units with higher prices for other units.
The Canadian government has finally woken up to the tremendous potential of vacant and underutilized military barracks, post office sorting stations and office clusters. In April, as part of Canada’s Housing Plan, it announced a Public Lands for Homes strategy to facilitate rapid construction on hundreds of well-located federal properties across Canada. The 2024 budget set aside $500 million over five years to launch a public lands acquisition fund to buy land from municipal, provincial and territorial governments and use the land for housing (Government of Canada, 2024b).
There are national best practices to build on. The St. Lawrence Neighbourhood in downtown Toronto, created in the 1970s, maintains one-third each of deeply affordable public housing, non-market co-op housing that was affordable to moderate-income households at the start and has become more affordable over time, and market ownership condominiums (Hulchanski, 1990).
This “rule of thirds” (one-third deeply affordable public housing, one-third affordable rental and one-third market ownership) is a characteristic of the European developments on public land described above.
In Vancouver, 11 parcels of municipal surplus land have been developed by B.C.’s Community Land Trust as a combination of co-op housing and deeply affordable supportive housing for more than 1,000 residents (Co-operative Housing Federation of British Columbia, n.d.). Also in Vancouver, a partnership between the Musqueam, Squamish and Tsleil-Waututh First Nations, and the Canada Lands Company is developing a mixed-income community, Jericho Lands, for 20,000 people on a former military base (City of Vancouver, 2021). And the Squamish Nation is developing Senakw in downtown Vancouver with 6,000 homes, including deeply affordable housing for Indigenous people (Cyca, 2024). In Ottawa, 1,100 mixed-income homes are being built by Ottawa Community Housing (2024) next to a light-rail station.
Government developers with a social mission have a strong record of success in Canada and internationally of creating mixed-use, mixed-income green communities with low greenhouse-gas emissions, accessibility to allow aging in place and a large proportion of deeply affordable homes.
There is another sign in Canada’s Housing Plan that the federal government is starting to learn from the successes of the past: a willingness to use the Canada Infrastructure Bank to finance housing, and increasing the annual limit of Canada Mortgage Bonds — bonds guaranteed by CMHC and used as investment vehicles in residential mortgages — to $60 billion from $40 billion (Government of Canada, 2024a). Now, the challenge is to make sure the right homes are prioritized.
Between 1973 and 1994, the federal government enabled the building of an average of 16,000 to 20,000 affordable non-market homes a year, up to 20 per cent of total home completions, using low-rate long-term guaranteed mortgages (St. Denis, 2022). If we had kept up that rate, we would have over 500,000 more affordable non-market homes than we do today — and much less homelessness. Countries that have had stable and sustainable forms of non-market financing, including Austria and Denmark, have revolving loan funds that are replenished by mortgage payments over 35 to 40 years (Organization for Economic Co-operation and Development, 2020)
Part of the problem in Canada is that direct government financing has not prioritized low- and moderate-income affordability, as it did in the 1970s and 1980s. And there are few alternatives to government financing. Canada, unlike the United States, doesn’t have mechanisms that either direct banks (through the U.S. Community Reinvestment Act) or incentivize corporate or pension-fund financing (through the U.S. Low-Income Housing Tax Credit) to invest in affordable housing. Canada also has a lower rate of philanthropic investment in affordable housing than does the U.S. (Social Venture Connection & University of Toronto Infrastructure Institute, 2022).
Three things would make a game-changing difference in how affordable housing is financed. First, clear, income-based definitions of “affordable” and “deeply affordable” housing should underlie all federal unilateral and bilateral housing programs. This would allow for clearer priorities, a stacking of grants from different levels of government and the monitoring of results against targets like ending chronic homelessness and reducing core housing need (Whitzman, 2024).
Second, prioritizing deeply affordable housing for both direct and indirect government subsidies should be encouraged. Although GST exemptions for purpose-built rentals, as the federal government announced in 2023, are a good short-term solution to mitigate construction slowdowns, development charges need to be replaced with better ways of funding infrastructure (Government of Canada, 2023b; Sancton, 2021), and direct subsidies through low-cost long-term guaranteed loans should be limited to scaling up deeply affordable housing. The Canadian government needs to return to its postwar practice of starting from the price point it wants to achieve — for example, the $6,000 to $7,000 Victory Houses built after the Second World War met the needs of a moderate-income household moving into their first home (Buchove, 2021) — and reverse-engineer policy settings from that point.
Third, combining sources of funding should be encouraged. For example, in Quebec, non-profit providers have been prioritized for rent supplements, which provide more secure tenure to low-income renters compared to relying on private landlords (Pomeroy et al., 2019). Canada’s Housing Plan proposes combining federal land with the Apartment Construction Loan Program. If these could be combined with exemptions to municipal development charges and property taxes for affordable housing, provincial rent supplements, and health and social service supports, much more deeply affordable supportive housing could be achieved.
Across Canada, only a handful of non-market and market-affordable developers have the experience, expertise and asset base to scale up housing on large transit-oriented developments — basically, developers with the clout to go to a major bank or mortgage provider and ask for $100 million in financing.
Habitat for Humanity, for one, has an impressive portfolio. The non-profit organization has a target of building 10,000 homes on government land in the Kitchener-Waterloo region in Ontario (Groleau, 2024). The Canada Lands Company (2024) has the potential to expand its national role with the Jericho Lands development in Vancouver as well as 2,800 planned homes in Montreal’s Wellington Basin, a property acquired from Transport Canada.
Montreal, Calgary, Ottawa, Edmonton and several other cities have impressive municipal builders. Whistler’s public builder provides the majority of housing in that community (McElroy, 2019). B.C.’s Community Land Trust, led by the co-operative sector, fills that role in Vancouver (Co-operative Housing Federation of British Columbia, n.d.). Before amalgamation in 1997, Toronto’s CityHome was an excellent public builder, but more recently Toronto Community Housing, a large social-housing provider, has had leadership woes that have led it into unsuccessful public-private partnerships (Burman, 2019), and Toronto’s co-operative and community housing providers have not attained scaling capacity.
There are thousands of non-market housing providers and developers across Canada — probably too many to make an effective sector (Pomeroy, 2017). Some community housing providers specialize in supportive housing to help people avoid or exit homelessness. There is a maximum effective size (30 to 50 units) for housing projects for people with high-support needs, like long-term care or group homes for people with intellectual or cognitive impairments (Oudshoorn et al., 2022). Supportive-housing providers can be partners in redevelopments — like the four storeys of supportive housing that join six storeys of non-market housing in Calgary’s Sierra Place, an innovative office conversion (Green, 2021).
Another way to scale up small and medium-sized affordable housing projects is to enable zoning and building-code changes to allow small (six storeys or fewer) apartment buildings in formerly single-family neighbourhoods near transit, jobs and services. Canadian cities are taking rapid baby steps toward legalizing multi-family housing. Three- to four-storey units are allowed as of right in all B.C. municipalities with a population over 5,000, and six-storey units are allowed near frequent public transit (British Columbia Government, 2024c). Far less ambitious three-storey units are allowed as of right on most lots in Ontario (Government of Ontario, 2023).
In June 2024, the B.C. government took an important step toward legalizing single egress (one staircase or elevator) small apartment buildings up to six storeys, which would facilitate single-lot apartment conversions, enable larger three- and four-bedroom apartments, and have a huge impact on energy efficiency by providing greater capacity for cross-ventilation (Heikkila, 2024). Edmonton, a Canadian leader in zoning reform, eliminated minimum parking requirements in 2020 (City of Edmonton, n.d.). Edmonton, Calgary, Halifax and Toronto are among the cities that waive property taxes for non-market housing (Gyulai, 2024). Further work remains to be done on minimum front and side lot setbacks, legalizing small elevators, reducing development charges, greatly improving approval times and processes, and changing other rules that limit affordable, accessible and energy-efficient choices such as small apartment buildings.
Canada’s Housing Plan has promised a pre-approved design catalogue of multiplex, modular and accessory dwelling unit homes by the fall of 2024. Leading-edge non-market design groups like UTILE, a Quebec developer of deeply affordable student housing, and Indwell, a western Ontario developer and provider of deeply affordable supportive housing, have shown capacity to scale up, using techniques like modular construction and housing on top of churches, fire halls and health centres. The city of Toronto is identifying small parking lots, commercial strips and other redevelopment opportunities (Jeffords, 2024).
The only way to achieve deep affordability in the housing sector is a co-ordinated approach that combines mechanisms available to all three orders of government (what I call a “loaded nacho” approach):
Many recommendations proposed by the Affordability Action Council (2023) have been actioned by all levels of government in the past eight months: a better federal land program, leveraging the investment power of the Canada Infrastructure Bank, and rapidly removing barriers to small-scale apartment construction, among other things.
The challenge now is to ensure that these promising reforms are implemented in ways that work together to prioritize deeply affordable housing. The key to doing so is having clear, income-based definitions of “affordable” and “deeply affordable” housing across programs. This would allow governments to set clearer priorities, it would permit a stacking of grants from different levels of government, and it would simplify the monitoring of results against targets like ending chronic homelessness and reducing core housing need.
We have the tools to improve housing affordability for very-low- and low-income Canadians. Now it’s a matter of using them wisely.
[1] Unilateral programs rely solely on federal dollars, whereas bilateral programs, like rent supplements, are co-funded by provinces and territories.
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This Insight was published as part of the Toward a More Equitable Canada research program, under the direction of Shaimaa Yassin. The manuscript was copy-edited by Rosanna Tamburri, proofreading was by Zofia Laubitz, editorial co-ordination was by Étienne Tremblay, production was by Chantal Létourneau and art direction was by Anne Tremblay.
Carolyn Whitzman, PhD, is a senior housing researcher at the University of Toronto School of Cities, a member of the federal Expert Panel on the Homebuilding Industry and the author of Home Truths: Fixing Canada’s Housing Crisis.
To cite this document:
Whitzman, C. (2024). Homeward bound: How to create deeply affordable housing. IRPP Insight No. 56. Montreal: Institute for Research on Public Policy.
The opinions expressed in this paper are those of the author and do not necessarily reflect the views of the IRPP, its Board of Directors or sponsors. Research independence is one of the IRPP’s core values, and the IRPP maintains editorial control over all publications.
IRPP Insight is a refereed series that is published irregularly throughout the year. It provides commentary on timely topics in public policy by experts in the field. Each publication is subject to rigorous internal and external peer review for academic soundness and policy relevance.
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ISSN 2291-7748 (Online)
Montreal – Canada is in the midst of a severe housing crisis. The federal government has unveiled two major housing initiatives in recent years, but neither has adequately targeted the “deeply affordable housing” needed to address homelessness and reduce core housing need among very-low- and low-income households.
According to new IRPP research, delivering on “deeply affordable housing” is achievable, but only by taking a co-ordinated approach that combines mechanisms available to all levels of government.
“It’s what I call the loaded nacho approach,” explains the paper’s author, housing expert Carolyn Whitzman. “Each level of government needs to add its own ingredients to the mix to ensure success.”
In her paper, Whitzman proposes a three-pronged approach:
In addition, Whitzman calls for the use of clear and consistent income-based definitions of “affordable” and “deeply affordable” housing. This would allow governments to set clear priorities and would permit a stacking of government grants while enabling the monitoring of results against set targets.
“We have the tools to improve housing affordability for very-low- and low-income Canadians. Now it’s a matter of using them wisely,” says Whitzman.
