To solve Canada’s housing crisis, make renting great again

If admitting you have a problem is the first step towards fixing it, then Canada’s new housing minister still has some work to do.

In an interview with Bloomberg last week, Sean Fraser said: “Our goal is not to decrease the value of their home. Our goal is to build more units that are at a price that other people, who don’t currently have their needs met, can afford.”

This is a bit like saying you’re going to lose weight during a two-month vacation to Paris: a nice dream, maybe, but not realistic. It speaks to the exceptionally fine balance the Trudeau Liberals are trying to strike here, one that wants to have its policy cake and eat it, too. But when millions of Canadians are subsisting on the housing equivalent of overpriced breadcrumbs, this posture is more likely to inflame their anger than address it.

That’s because, alas, the law of supply and demand is unyielding here. Any increase in housing supply big enough to actually meet the needs of the underhoused in Canada will naturally and necessarily decrease the value of other homes. Worse, it would hit recent buyers the hardest, not the baby boomers who bought their houses in the 1970s and 1980s and watched them turn into bottomless ATMs. As far as political traps go, this one’s a doozy, and it could easily ensnare Fraser and the Trudeau Liberals — if it hasn’t already.

The way out isn’t to embrace Conservative Leader Pierre Poilievre’s anti-gatekeeper rhetoric or cut homebuilders in this country a blank cheque. Instead, we must embrace the policies of the last Prime Minister Trudeau — and fix a mistake the Liberals made three decades ago when they slashed federal investments and involvement in housing. By focusing on security of tenure rather than ownership and supporting non-market options for seniors, students and other groups that might not want or need to own, the federal government can still make a big difference here.

That’s outlined in a new report from a coalition of non-profit and for-profit housing providers, developers and investors, one that calls for a mix of pro-rental incentives and pro-affordability supports. “Adding substantial new supply to address rental affordability is key to solving the housing crisis,” it says. “One-third of Canadians rent, with a higher proportion renting in our urban centres, which experience the most significant challenges with affordability. When there is a shortage of supply, rents get bid up by those most able to afford higher rents.”

In other words, Canada needs to find a way to make renting great again — or, at the very least, not completely terrifying. After all, renting is often an important stepping stone to ownership for Canadians, but that only works if the stone they’re stepping on isn’t actually a landmine. Rents have soared across the country over the last few years, and it’s not just in Vancouver or Toronto. In Guelph, for example, the rent on a one-bedroom unit has doubled since 2017, and there are dozens of other Guelphs out there. In order to take these markets off the financial boil, the federal government must encourage the development of massive amounts of purpose-built rentals — ones that can’t be put on Airbnb or sold out from underneath the tenant.

One way to do that, the report suggests, is by waiving the HST on new purpose-built rentals, an idea that former City of Toronto chief planner Jennifer Keesmaat endorsed enthusiastically. “Forgiving the HST would enable us to deliver more affordable housing on our projects. The federal government can unlock this with the stroke of a pen.” It could also defer capital gains taxes and the recaptured depreciation that arise on the sale of a rental building if the owner plows the proceeds into another new building. That would further incentivize the construction of the right kinds of supply, ones that would add density most quickly and homes most affordably.

The federal government also needs to lead a major push for more non-market and affordable housing. “Canada must double the existing social housing stock of 655,000 units to bring the country up to the OECD and G7 averages,” the report says. How? By offering 25-year, fixed-rate financing for new builds and upgrades that meet “certain accessibility, affordability and climate-friendly criteria,” for starters. By creating so-called “property acquisition programs” for non-profit housing providers that would help them buy existing rental housing or hotels and support office-to-residential conversions. And by putting a multiple to the $1.5 billion it committed in the 2022 budget to its new Co-operative Housing Development Program. More money isn’t always the answer, but in this case, it certainly can’t hurt.

This won’t happen overnight, which is why the report recommends two new housing benefit programs. One would target those most at risk of homelessness, while the other would support the growing number of renters who are becoming housing-poor due to rising rents and incomes that can’t keep up. Both would buy the federal government some time before the larger changes being proposed can actually take effect.

But therein lies the rub — politically, at least.

Politicians don’t tend to like solving problems for future governments, especially when they might be of a different partisan stripe. And even if the Trudeau Liberals implement all these changes today, the real benefits wouldn’t be felt for years. Then again, if they want to have any hope of still being the government in a few years’ time, they’ll need to convince Canadians that they’ve got a handle on this increasingly crucial subject.