Very little of substance from any level of government in Canada gives me hope that affordable housing (AH) in Ontario will become a reality within the next decade, but I see much evidence that it won’t happen.
AH is a municipal-level issue but cities like Oshawa have sold off all their AH inventory. Toronto closed 1,100 uninhabitable units in 2017. They discovered it wasn’t affordable. The Office of the Parliamentary Budget Officer’s 2019 Federal Program Spending on Housing Affordability report stated, “… Canada’s National Housing Strategy (NHS) largely maintains current funding levels for current activities and slightly reduces targeted funding for households in core housing need. CMHC’s assumptions regarding the impact of NHS outputs on housing need do not reflect the likely impact of those programs on the prevalence of housing need.”
In other words, nothing the federal government is doing today is any different than before.
Infrastructure Canada reported in their Inventory of Publicly Owned Social and Affordable Housing Assets (2016) that there were 252,450 available social and affordable housing units. Statistics Canada’s May 2017 Dwellings in Canada stated there were 14,072,080 occupied private dwellings. Therefore, 98.2 per cent of Canadian residential housing was financed by the private sector.
The provincial government can’t solve the AH issue. Ontario’s 2018 debt of $343 billion, for example, was the largest subnational debt worldwide – higher than 166 other countries and ranked No. 20 worldwide.
The Ontario Ministry of Housing’s April 2019 Community Housing Renewal Strategy report stated that 106,600 AH units are at risk of exiting the community housing supply inventory within the next seven years.
Purpose-built apartment buildings arguably house the vast majority of vulnerable tenants, yet many Ontario municipalities levy up to 2.5 times more property tax for multiresidential properties than single-family homes and condos. Property tax is by far the single largest cost in tenant rent.
Even if we find the money, who’s going to build it? A 2020 BuildForce Canada reports states that Ontario’s construction and maintenance sectors are currently operating at full capacity and will need to recruit an additional 100,000 workers by 2029. Current apprenticeships aren’t keeping pace with retirement levels.
CMHC’s pervasive yoke to demand that a percentage of all housing they fund maintain a 20- to 30-per-cent lower-than-market rent for 40 years is fatally flawed. There’s an immutable AH paradox: The more affordable the rent, the lower the municipal income (property tax) available to provide and maintain affordable housing infrastructure, services and programs. Therefore, the more quickly affordable housing falls into disrepair and ruin, especially in public housing.
Ontario’s plan to make secondary suites in residential homes more attractive has failed dismally. The province’s brutal anti-landlord tenancy laws and the literally broken Landlord and Tenant Board are driving small-to-medium landlords away in droves or into bankruptcy.
The Centre for Urban Research believes AH will remain challenged. Its February 2020 report states, “Demographically driven housing requirements are likely to remain strong. CUR expects there to be underlying demand for 50,000 (GTA) dwelling units per year between 2016 and 2031 … compared to an annual average of 38,000 households created between 2006 and 2016.”
Government believes seniors downsize or leave homeownership, which contributes to increasing housing supply. The expected great baby boomer downsizing event didn’t happen. CMHC’s August 2019 Housing Market Insight report said seniors were not freeing up their homes for younger households, further slowing the flow of resale homes. It said the “rising homeownership rate among seniors may continue, which will translate into less supply being freed up for younger generations.”
If residential landlords don’t go bankrupt in the process, at least the governments’ multi-decade systemic failures will continue to fuel high demand and low supply. Rents (and house prices) will continue to outpace family income growth. The paltry cash flow (net income) of rental properties will continue to shrink but resale values will increase sharply. You’ll have to sell your rental property to realize this upside but there’s never been a better time in Canadian history to sell than today. Rising interest rates means more of your financed equity will go to the banks rather than your pockets.
Governments seem oblivious to the fact that AH isn’t just about affordability for home buyers and renters. The AH pandemic will never be solved until the problem is properly defined: AH is “self-sustaining housing that is affordable for the tenant, the landlord and the builder.” Most mainstream lenders won’t fund affordable housing and the few that might demand CMHC mortgage guarantees.
There are solutions. The late 1960s and early 1970s boom in rental property construction proves it. All the current solutions are universally hampered by discouraging tenancy law, political cowardice and vote pandering, media sensationalism, debilitating self-interest groups, fatally flawed housing policies, a broken tenancy judicial system and a misplaced belief that any level of government has the financial means to solve the AH crisis.
Chris Seepe spent 35+ years in I.T. before entering commercial real estate a decade ago. He’s a published writer and author of two books on “landlording,” course instructor, president of the Landlords Association of Durham, and a commercial real estate broker of record at Aztech Realty in Toronto, specializing in income-generating and multi-residential investment properties. Call (416) 525-1558, or send him an email.
