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A federal fund could allow nonprofits to purchase and preserve existing stock, freeing up private sector capital for reinvestment
Published on December 30, 2023 • Last updated 4 days ago • 4 minutes reading time
Construction workers on the site of an affordable housing project in the Thornecliffe Park area of Ottawa. Photo by Spencer Colby/The Canadian Press files
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By Mark Kenney and Sam Kolias
The federal government has taken a series of robust measures to boost the construction of new homes, and as officials consider the next steps to address the crisis, they must pursue a parallel line of attack that is just as important as the new supply – securing the existing one Stock of affordable housing protected and expanded.
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The current shortage of social housing, as well as the higher costs of rent and homeownership, have left more Canadians at risk of homelessness. Many people are forced to sleep in tents this winter – and that is unacceptable.
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A recent Abacus Data survey found that nearly 80 percent of low-income renters are concerned about their ability to pay rent. A staggering 57 percent are afraid of losing their home.
Some estimates suggest that Canada currently has a shortage of 4.4 million homes for people in housing need.
The unacceptable level of housing insecurity is why Canada's five largest publicly traded residential REITs – responsible for 120,000 purpose-built, fixed-term rental apartments, more than half of which are considered affordable – formed Canadian Rental Housing Providers for Affordable Housing (ForAffordable.ca). have. to work together on innovative solutions.
We propose one way to rapidly expand the affordable housing stock: the creation of a new federal fund that will allow nonprofits, charitable organizations, and community land trusts to acquire existing rental housing and maintain rents at affordable levels indefinitely.
From the National Housing Accord to the NDP to provinces like British Columbia, there is widespread agreement that a housing acquisition fund is the best and fastest way to preserve affordable housing.
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And we already have a good track record of working with nonprofit organizations. We view them as preferred partners.
For example, by our calculations, a $1 billion fund could immediately preserve or create 10,000 much-needed units of affordable housing.
By comparison, new affordable housing units can take three years or longer to come online at up to three times the cost—and not necessarily in the communities that need them most.
Such a fund would help alleviate the crisis by helping nonprofits purchase buildings with rents at or near affordable levels; The units could then be used for affordable housing at or below market rents. The federal government, through CMHC or another financing channel, would provide the initial equity equal to approximately one-third of the purchase price, and traditional CMHC-insured mortgage financing would provide the remainder. The financing mechanism should allow the nonprofit purchaser to maintain a reserve fund to ensure that the building is adequately maintained.
In return, for-profit owners would use such sales to raise the capital needed to reinvest in other new developments, increasing Canada's housing supply.
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The remarkable simplicity of this plan is that most of these buildings are already located where the need is greatest: in densely populated urban neighborhoods where public transportation and services are easily accessible.
It's a clear win-win situation.
Canada's homelessness rate has risen with inflation and the rising cost of living, leaving many people having to choose between food and shelter. An affordable housing fund would help tackle homelessness and also free up capital to invest in the provision of new homes.
We're pleased to see Housing Minister Sean Fraser eschewing old-fashioned thinking to address a housing crisis that is negatively impacting Canadians of all income levels. His unconventional approach breaks free of the traditional protocols and legal shackles that have led to unnecessary delays and, even worse, outstanding housing projects that simply never come to fruition.
Cities like Toronto – which just received $471 million in federal funding to increase housing in densely populated locations near transportation – and the province of British Columbia have already recognized the potential for an acquisition financing program that provides permanent, affordable housing owned by non-residents. Profits and indigenous housing organizations. Toronto's program guarantees that units remain affordable housing for at least 99 years.
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We hope that the Minister will consider the introduction of a national program to be useful. It's an innovative, cost-effective and efficient way to help people who need housing most – while freeing up capital to stimulate the construction of more new homes in the future.
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The housing and affordability crisis has many causes, including overly burdensome zoning regulations and development fees and a lack of creative policy and funding from governments at all levels and across party lines. It has taken years of neglect to get us here, and it will require an all-hands-on-deck approach to solve the problem.
Mark Kenney is CEO of Canadian Apartment Properties Real Estate Investment Trust. Sam Kolias is Chairman and CEO of Boardwalk Real Estate Investment Trust
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