Housing Affordability and Poverty Reduction – Innovative Policy Solutions that Allow Us to Address Both

Kevin Lee, CEO, Canadian Home Builders’ Association

Housing has emerged as a major area of public policy concern in Canada, and not surprisingly, given the daily features by news organizations about how little this amount or that amount buys you these days in Vancouver, Toronto, and a growing number of other markets. And with good cause, the federal government has started to work on the issue, having launched an initiative to develop a National Housing Strategy as well as a Poverty Reduction Strategy. To be truly successful, however, the government needs to take a comprehensive approach to these questions and ensure that both of these strategies include two essential pillars: a Portable Housing Benefit, and policies to address market-rate housing affordability.

A successful housing strategy must address all elements of the housing continuum if it is to truly help those most in housing need. This means addressing the full continuum: from homelessness to social housing, to housing assistance, right up into affordability in market-rate rental, and eventually in home ownership.  Canadians in each and every place in this continuum aspire to move on to the next level, and indeed, our housing market is based on each and every one of these segments being accessible to the demographic market it serves. Why should market-rate affordability also be included in these strategies? Because the ripple effects of deteriorating affordability and barriers to homeownership cascade right down to those in housing need, and impede progress in poverty reduction if not addressed.

With finite resources to address any public policy issue, innovative solutions are required.  To be successful, we need to find the tools to house more people, in better housing, for less public expense.

And individual Canadians not only want to move across the housing continuum towards market-rate housing, but a prosperous and thriving society requires an environment where people move along the continuum. Even more importantly, we need to ensure people are not sliding back into poverty because of changes in their housing costs. If affordability problems in market-rate housing push those who would otherwise be self-sufficient into a requirement for public support instead, our system has failed.

With these principles in mind, the “National Housing Collaborative” has been hard at work. The National Housing Collaborative is a cross-sectoral group of national housing stakeholders – public, private and non-profit – supported by foundations and charities.. It formed to develop transformative, durable and innovative policy proposals in the housing space, and one of its key recommendations is to ease the burden on social housing through a Portable Housing Benefit.

The majority of Canadians in core housing need do not have a “housing problem” — they have an “income problem”. More than half of such households are already properly housed in rental units which are large enough and in adequate repair—so they don’t need a place to live, what they need is of the requisite income to meet life’s essential needs, and hopefully at some point move along the housing continuum. Paying rent is the largest item in a family’s budget, and for these families, there is simply too little left at the end of the month for other essentials.

Portable Housing Benefits (PHBs) would alleviate much of this basic challenge, as they are housing subsidies paid directly to tenants whose current housing is not affordable to them. Limited PHB programs are already successfully used in many jurisdictions in Canada, and extensive programs are used in many other countries. PHBs give low-income households more ability to pay the rent and also meet their other needs.

As many on the front lines of anti-poverty organizations would agree, simply building and offering more and more social housing is too slow, too expensive and still ultimately fails to achieve the desired results.

This is not a case against social housing. Yes, we need social housing—we need more of it in strategic locations like near transit, and much of what we currently have needs to be improved—but social housing is not the answer in a majority of cases.

Governments cannot ‘build’ their way out of this situation—nor should they. Basic arithmetic says that even attempting to do so at current government costs of $150,000+ per unit could easily consume a $100 billion, leaving over a million households still in need after ten years. And even if current rates of social housing construction were doubled, it would take over a century to meet the need.

Enter Portable Housing Benefits.

The PHB design put forth by the Collaborative at full scale ($1.2B/year) could move a massive 800,000 people out of housing need, and potentially out of poverty over time. Designed right, it would do so without causing rental inflation or reducing market-wide rental supply.

Preliminary estimates show investing the same quantum of public subsidy funds through a PHB model would immediately support 16 times as many households on Day One.

One of the greatest strengths of PHBs is they promote individual autonomy and choice because tenants are not tied to a particular housing unit. Families can choose where they want to live and find accommodations that meet their specific needs, and move as their circumstances change—like getting a new job across town, be walking distance from the kids’ school, or closer to daycare.

A Portable Housing Benefit is arguably the single most cost-effective and far-reaching anti- poverty measure open to the federal government. It helps more families than traditional models, and it stretches scarce public dollars to a higher social return on investment.

To make this system work, however, it is also essential that policy makers also work to keep homeownership within reach of would-be first time homebuyers – because 80% of rental units that become newly available each year for rent are those vacated by people buying their first home. Thus, keeping entry-level homeownership accessible makes more rental stock available, including for those families that receive PHBs. And it allows the housing continuum to function in a healthy way.

Effective solutions require an integration of housing strategies and poverty reduction

strategies. By introducing a Portable Housing Benefit model into our housing mix, and keeping a policy eye on affordability for entry-level homeowners, we can take great strides towards success in both.

– Kevin Lee, CEO, Canadian Home Builders’ Association