Canada is experiencing a crisis of housing supply and affordability. Headlines scream about the issue every day.
Politicians blame the other party (past or present) and promise they can fix the problem if given enough time (or the ability to change the rules governing development).
Meanwhile, hundreds of thousands are unhoused, millions pay more than they can afford for shelter, the market consistently fails to deliver housing to meet the needs, and a generation has given up on the dream of home ownership.
Crises of supply and affordability are not new. During Canada’s early colonial period thousands of European settlers faced the urgent need for shelter. Some received provisions from those promoting colonization, but most were left to build their own homes, as Indigenous peoples had for generations.
Self-building modest homes remained common — even at the fringe of cities such as Toronto — until the early 20th century when governments began to adopt regulations to promote health and safety. Those who couldn’t afford to build — like new immigrants or impoverished families — often lived in rooming houses or tenement flats until the mid-20th century.
Finally, during the Second World War, the Canadian government recognized that it needed to act on the housing crisis. Wartime military and industrial growth increased demand for homes for war workers.
In Britain, the government saw housing — and new town planning — as vital to preparing for post-war reconstruction, leading Canadian politicians to take note.
Canada’s wartime housing projects were modest by comparison with Britain’s but demonstrated the potential of rapid large-scale construction initiatives to erect needed housing.
The national government built further units for veterans after the war, but by the 1950s it turned to assisting the market to finance and develop housing. Still, through various programs for building social housing and supporting market construction, the government of Canada participated in over half the housing starts in 1971.
Government showed it could make a difference.
During the 1960s many Canadians achieved the dream of home ownership. The average home then cost only twice the average family income and could be paid off in 10 to 20 years. Ownership rates peaked at 69% of households in 2011 before declining over the next decade.
In 1971 half of young renters could aspire to home ownership, but five decades later three-quarters of renters cannot afford starter homes in most cities and those earning minimum wage can’t afford rents for one-bedroom apartments. The housing crisis is linked to declining hopes for economic stability and social mobility.
In 1992, even as emergency shelters and foodbanks struggled to meet demand, the president of Canada Mortgage and Housing Corporation said, “The legacy left by federal, provincial and private involvement in housing is a nation that is classed among the best housed in the world.”
Through the 1980s and 1990s governments slashed spending and insisted that the market could more effectively address housing needs. As experience has shown, however, the market has fallen increasingly far behind in providing housing units.
After decades of federal inaction on housing, in 2017 the Justin Trudeau government announced the National Housing Strategy. Boldly proclaiming that housing is a human right, the strategy was accompanied with promises of $40 billion in funding. By 2023, the government committed $82 billion to various initiatives, but that number included loans to be repaid and contributions from other levels of government.
Critics of the strategy note that 40% of the promised funds supported low-interest loans to developers, potentially contributing to the financialization of rental housing focused on middle-class tenants. Not-for-profit organizations had trouble qualifying for loans. Relatively few new affordable units resulted from the billions of dollars announced to date.
Despite the significant investments in housing, the crisis of affordability and supply grows worse daily.
Why haven’t we solved Canada’s housing crisis? It’s true that the problems have developed over decades and will take time and investment to remedy. But it’s also the case that discussions of ‘the problem’ have been overly simplified. Many factors aligned to shape our current dilemma. Until we acknowledge the complexity of the problem, it’s unlikely that we will find solutions.
10 factors affecting affordability
1. Planning processes and regulations and 2. NIMBY opposition to change
Political leaders, especially at the provincial level, have focussed their attention on two related factors that they can control through legislation.
First, they argue that local planning processes and regulations slow down approvals and drive up the costs of housing. Second, they say, NIMBY (not in my backyard) attitudes from residents limit density and slow down approval processes.
Such critiques followed the lead of conservatives in the United Kingdom who pushed housing targets and planning schemes on local governments in an effort to increase housing supply while dismissing local concerns.
Drawing on neoliberal tropes about the need for ‘less government’ and creating a more ‘welcoming’ environment for business, provincial governments across the country have ‘cut red tape’ and made it easier for developers to access land without being subjected to planning rules, environmental assessments, or municipal fees levied to cover the costs of infrastructure and services. Planning acts have been amended to reduce residents’ rights to review developers’ proposals and to appeal decisions.
Limiting the powers of local governments and residents, however, threatens to undermine grassroots democracy and induce major neighbourhood change without guaranteeing that affordable units will be built in a safe or sustainable way.
What about factors that governments may not want to discuss?
3. Inadequate government commitment
Those who study the history of housing in Canada identify inadequate government commitment and coordination over the last several decades as a key factor in the contemporary problem.
Housing starts reached their highest level during the 1970s, when the federal government was supporting the building of public housing and stimulating housebuilding with various incentives to buyers and builders. In withdrawing from supporting housing initiatives, and failing to ensure that the provinces met their obligations for income and housing supports, Ottawa contributed to growing homelessness and social polarization during the 1980s and 1990s.
With governments at all levels largely out of housing production, housing starts fell far short of demand (driving prices up).
In many cities, the supply of affordable social housing units contracted as local authorities lacked the financial resources to repair them. Some affordable options — such as single-room occupancies for low-income individuals — decreased in numbers as governments dismissed them as not offering ‘the standard of housing we want to see.’
In recent years, municipalities have tried to bridge the gap by erecting transition housing or adopting policies to try to secure affordable units.
4. Political culture: ‘dangling keys’
Related to inadequate investment in affordable housing is a political culture that privileges home buying.
Since the 1950s, housing programs have supported home ownership, with subsidies to mortgage insurance and incentives targeted at market builders and developers. Since the 1960s, homeowners have escaped capital gains tax on the sale of a principal residence enabling massive wealth accumulation as home prices escalated. Tax-free savings plans to encourage people to save for downpayments advantage middle-income earners. Caps on tax assessment increases in provinces like Nova Scotia protect long-term owners from some of the costs of local services.
Eager to ‘dangle keys’ in front of potential voters, successive governments have initiated short-term programs to support home ownership rather than investing in affordable housing.
The current suite of programs under the National Housing Strategy suffers from some of the same problems as earlier policies.
The largest proportion of the funding has gone to the Rental Construction Financing program that provides low-cost loans to developers of rental units: the government has been reluctant to identify recipients.
The ‘fine print’ defining ‘affordability’ in the program is troubling: 20% of the units — size unspecified — must be affordable to median-income families in the area. That means that most households and individuals in need of decent rental housing will not be able to afford suitable units built with taxpayer subsidies.
The program helps developers but has been hard for non-profits to access.
The National Housing Co-investment Fund, which gets the next largest share of resources, provides loans and grants for partnerships that promise at least 30% of their units will rent at under 80% of area market rates for 20 years: that moving ‘market’ target is unlikely to ease the housing crunch.
Despite the promise of the NHS, relatively small proportions of the funding have gone to build deeply affordable housing.
5. Catastrophic loss
Hurricanes, flooding, wildfires, tornados, landslides, earthquakes, and other natural or man-made disasters can destroy many homes at once, putting immense stress on housing supply.
When hundreds or thousands of homes have to be replaced, inflation in construction costs, delays in rebuilding, and challenges in getting insurance can compound local housing issues.
With weather-related losses increasing due to climate change, maintaining and increasing supply becomes ever more challenging.
6. Concentration in the development industry
As a result of government policies assisting developers and builders to achieve ‘economies of scale,’ by the 1970s scholars were raising concerns about the power of the industry.
Today, land ownership around most cities is controlled (or optioned) by a small number of local firms, some of whom have the ear of government to obtain favourable treatment.
Because land is a finite good, the firms that control it have little incentive to release it at a rate that would bring prices down. If they hold the land longer, they may convince governments to increase permitted densities and thus enhance returns. Hence, developers have not built tens of thousands of already permitted units, waiting instead for future opportunities.
Through much of the 20th century, most homes were built by small firms, but recent years have seen greater vertical integration in the industry as developers partner with or acquire their own building companies.
While mass production of housing by large firms created affordable homes in the 1950s, the incredible growth of cities and the current business plans of developers undermine contemporary prospects.
7. Financialization of housing
Housing has long been seen as a vehicle for household wealth accumulation, but as interest rates fell in the wake of the financial crisis, it offered a secure investment opportunity for pension funds, insurers, and real estate investment trusts.
Small-scale housing projects increasingly gave way to large-scale, high-rise towers. Companies often bought affordable apartment properties, evicted tenants for renovations, and then relet units at higher rents.
During 2022 and 2023, investors bought a significant proportion of homes sold, contributing to escalating prices: in some cases, they turned single-unit homes into multiple-unit accommodations.
However, the growth of the sharing economy resulted in over 30,000 units being turned into short-term rentals.
Thousands of affordable rental units disappear each year as rents rise much more quickly than inflation.
While Canadians once thought of home as an emotional asset, today it is increasingly likely to be seen as a lucrative investment commodity available to the affluent.
8. Economic factors
Canada’s economy transformed in recent decades — from a strong reliance on primary industries and manufacturing to a bigger role for the service sector and knowledge economy. Urban regions grew rapidly as centres of education and innovation, increasing demands for housing.
In the 1970s, as housing supply peaked, the average Canadian house cost about two times the average family income. By 1980, it was three times income. Today the average home costs nine times the average income.
With higher housing costs, household debt levels in Canada soared to highest in the G7. At the same time, real estate became a bigger contributor to Canadian GDP: up from 10% in 2022 to 13% in 2023 (more than twice the component in the US economy).
Despite the growing value of the real estate sector, housing starts failed to keep up with demand. In 1976, CMHC reported over 273,000 housing starts for a population of under 24 million; in 2022, only 240,600 housing starts served a population of nearly 40 million.
In 2023, at a time of increasing demand, CMHC reported a decline in housing starts. Industry analysts blamed high interest rates and significant construction labour shortages for the decline.
By some accounts, Canada is short 80,000 construction workers and faces more retirements in the next decade.
9. The ‘HGTV effect’
Canadians’ expectations regarding their homes have changed dramatically over the last 50 years. Homes have gotten bigger, with walls removed to create vast open entertainment spaces. Bathrooms abound. Carpet yielded to hardwood, stone, and tile. Granite and quartz replaced Formica counters.
Each improvement, encouraged by cultural agents encouraging conspicuous consumption, added to the cost of the home.
New housing units are especially expensive, but the popularity of home renovations helps drive up the cost of older homes as well.
CMHC suggested in a 2022 report that building more market housing — at any price point — would ‘restore affordability’ as older units ‘filter down’ to other households. Filtering theory has been dismissed by housing scholars since the 1970s as evidence showed its ineffectiveness.
Instead, studies show that new housing has the potential to drive up regional housing costs. In cities like Vancouver, a ‘teardown’ property — abandoned for years — was listed for $3.5 million in 2022. A new house in Burnaby cost $1.75 million in 2022.
Unless thousands of less expensive units come on the market simultaneously, new housing is more likely to increase local housing costs than to bring costs down.
10. Demographic factors
Declining household sizes — as more women work, fertility rates stay low, the population ages, and more people choose to live alone — increase the demand for housing units.
In 1851 the average Canadian household had 6.2 people; in 2021 it had 2.4. Each census shows the size dropping further, increasing the number of homes needed to house everyone, and potentially reducing the household income available to cover housing costs.
High rates of homogamy — marrying within one’s class or educational achievement level — contributes to social and economic polarization. Thus, a pair of professionals have substantially higher income — and ability to afford housing — than two service-sector workers might. Unemployed individuals and couples, or those dealing with mental health or addictions issues, are at greatest risk of being unhoused.
The declining availability of affordable housing exacerbates a generational divide. Many Baby Boomers, who came of age during the 1970s and 1980s when homes were affordable and plentiful, became homeowners who have seen their property values balloon. Their children and grandchildren — the Millennials and Gen Z — find it much harder to find affordable housing.
Homeownership has allowed those who could buy before the 1990s to accumulate significant wealth, leaving homeowners with an average net worth 30 times that of renters.
Population growth from international and inter-provincial migration brings many new households to Canada’s cities and towns. Immigration has become the primary strategy to secure growth and to address labour shortages.
After a slowdown during the pandemic, immigration numbers spiked to help the population grow by one million in 2022. Recently, in an effort to find strategies to ease housing demands related to immigration, the federal government floated the idea of restricting the number of foreign students given visas.
What can get us out of this crisis?
The problems in our housing system — as in our health care system — have been decades in the making and will not be easy to resolve.
We need 3.5 million affordable units and 5.8 million total housing units by 2030 to have any chance to restore affordability.
Various think tanks and industry associations are lobbying strongly for financial breaks for the private sector to bring down the costs of borrowing and of building, with a promise that they can make a difference. Such initiatives are unlikely to help most Canadians find affordable homes. Instead, incentives may undermine the revenues that local governments need to provide the services and oversight we need to live safely and sustainably in our neighbourhoods.
Governments at all levels could reconsider the system of incentives that currently privileges homeownership and investment in housing as a financial asset. Given the popularity of such incentives among voters, however, it seems unlikely that governments will significantly change tax policies in ways that would help renters needing affordable housing.
Relying on the market to address the crisis involves misplaced optimism.
Any incentives to industry need to come with long-term requirements for true affordability: that is, rents geared to a maximum of 30% of household income.
Since market players are unlikely to appreciate such restrictions, the federal government needs to make significant funding commitments to finance or build tens of thousands of units of social housing to address lengthy waiting lists. Local housing authorities need the resources to maintain and improve existing social housing units, and to protect tenants’ rights. Programs to support not-for-profit and cooperative housing should be expanded.
In sum, the federal and provincial governments need to make major investments outside the market system if they want to improve affordability.
If housing is a human right, as the National Housing Strategy affirms, then we need substantially more affordable rental housing than we currently have.
Local authorities must be able to assess the environmental, economic, and social suitability of projects. The democratic rights of residents to influence policies and decisions about the future of their neighbourhoods must be respected.
Provincial policies that give developers license to develop land that municipalities have not approved for growth should be scrutinized for any whiff of patronage or inappropriate decision-making.
The greatest potential for addressing the housing crisis could lie in trying to learn from the past. The federal government should evaluate the programs it funded during the 1960s and 1970s to identify useful lessons it could implement with new policy directions.
The primary aim of any programs should be to deliver more affordable housing more quickly so that more Canadians have access to decent shelter.
Jill L Grant is Professor Emeritus of Planning at Dalhousie University and a frequent commentator on planning and housing issues.
Jill Grant;
Excellent article on the housing problem. There is no quick solution. What changes can be made to reduce the problem? I beleive it starts at the federal level.
Great article.
Brava. Great job! thanks
The arguments being made for a substantial investment in public housing and support for non-market housing have become more and more convincing to me. The problem I see is that senior levels of government have assumed heavy debt loads and are therefore unlikely to be willing to assume further debt. HRM could not conceivably assume the financial role needed.
great article & great comments … as always .. the ‘ powers that be ‘ will never see this
Mr. Adamson great reply
The builders are all paying the monetary cost (fee) of affordable housing rather provide it in the buildings ,so that should tell you something- they don’t want affordable housing and the cost (fee) is not high enough. Put the fee where they stop building, then you have their attention and maybe they will to help out then, when it affects their bottom line. Incidentally where does all the fee money go that the government collects in place of providing affordable units go?
Last point if we expect the people who created (governments/politicians) the mess
to fix – are we just fooling ourselves. Maybe they could hire Ms. Grant and her colleagues, she has a excellent understanding of the situation.
I hope this article makes its way into the hands of anyone and everyone in government that has anything to do with housing. Some years ago when I was leaving the employ of the Community Planning Association, Dr Grant encouraged me to place all the files at the Killam Archives. I did. However, through various moves and the passing of former friends & colleagues I came into a few more documents. One was “New Visions – Atlantic Women and Housing Conference, April 2-5, 1987.” There were many informed discussions and recommendations. One was: “The Federal Government should provide funding for 50,000 units of housing yearly.” That was 36 years ago! Here we are, still trying to make the case for government to build, manage and maintain more affordable, public housing.
‘why haven’t we solved Canada’s housing crisis?’ 1. we (that’s federal and provincial governments) got it wrong and threw money out there for developers to build homes and for the eventual home-owners to pay those developers with no sweat equity in the build, other than to apply for the grants. That’s the result of accepting the group think that only developers can build. Not so!
I built my own home in 1978-79 and hired the subs to do wiring,plumbing ,dry wall and kitchen cabinets. 1400s.f. sunken living rm. wall oven,counter top elements on a non-conforming lot in Stellarton. That’s the ’70’s version of ‘granite counter -tops! Also built the forms for the foundation-old school- wedges,whalers, 2 x 4 and tongue and groove sheathing. (Not recommended for a rookie).Peeled the foundation forms and used the material in sheathing the floor and walls of the house. I was 26 years old and had no building experience; a moment recalled- 10 p.m. with a string of lights up on the roof -shingling in late October. Teaching the next day.
A teacher building her or his own house? Why not!
A clerk in a grocery store? Why not! A production worker in a warehouse? Why not! Many of my friends,only one of whom worked as a carpenter, built their own homes and used the abundance of human capital like grand-parents, aunts and uncles, neighbors to advise us on the how-you-can-do-this level. Very popular ideas then: a) build three and the third one is free; and b) ‘you pay to learn’.
2. Owner-builder is now a dodo-bird; it needn’t be because the ‘we’ that has the ultimate say is the individual,motivated,determined and won’t-take-no-for-an-answer citizen.
In the city it’s about density; outside the cities, it needn’t be. A 900 s.f. home, carefully designed can house a family of four comfortably. Owner-builder with hired subs could make this build doable and affordable, but that doesn’t happen by throwing your hands in the air or worse- wringing them!
If what you want is to turn a key;walk in and pay the huge mortgage, and you can do that-good for you. Increasingly younger people can’t, so ‘younger people’ might want to tear a page out of the playbook of those who built their own in the ’60’s 70’s 80’s and 90’s. They also will have to turn the page on the status quo because the ‘we’ that is politicians and govs. are not solving the problem of affordability and contractors/developers are not interested in building affordable units.
Yes!
Interesting article. It seems like there’s a formatting mistake related to issue 1.
Thanks, that’s been adjusted.