Non-market housing
It helps, but we need market housing to meet the scale of the shortage
Someone asked on Reddit:
I would love to hear your thoughts on non-market housing, and whether you think it has a tangible impact on overall housing costs.
Good question. I always think, everything helps, whether we're talking about market or non-market housing. A recent example of a battle over non-market housing.
Non-market housing is limited by people's willingness to pay taxes. It costs about $500K to build an apartment, so even $1 billion will only build about 2000 apartments. Building one million apartments would cost 500X as much, so $500 billion ($12,500 per Canadian). Given people's opposition to tax changes like combining 5% GST and 7% PST into 12% HST, or a carbon tax that rises every year, it seems extremely unlikely that people would be willing to pay that much.
As Alex Usher points out: from 1973 to 1984, the heyday of social housing in Canada, we added about 16,000 apartments per year. CMHC's estimate is that to restore affordability to 2003-2004 levels, we need about 350,000 apartments per year for the next 10 years.
The big advantage of market housing is that it scales. You don't need to appeal to altruism - people want to live and work here, and other people want to build housing for them. Construction is risky, so profit margins on rental construction projects are something like 10% (not annually, for the whole project). Owning and operating rental housing isn't risky, so profits ("cap rates") are more like 3-4% - an example.
So I think the appropriate strategy is:
(1) Make it easy and fast to build market housing (especially low- and mid-rise projects, which will always be faster to plan and build than high-rises), and
(2) Build as much non-market housing as possible. The federal government allocated $15B in new funding for non-market housing in 2017 - that's about 30,000 apartments.
Rob Gillezeau, a progressive economist who has advised the federal and BC NDP:
I'm a huge fan of non-market housing options, but if we are treating them as a replacement to market housing rather than a supplement then you need to dramatically scale up the size of government (eg think of the $35 billion price tag for 65,000 units being discussed in Toronto).
What's the best approach? We want to expand supply as quickly as we can, and the best way to do that is allow the market to build as quickly and with as little administrative costs as possible.
We can then layer public provision on top, which should ideally play an important countercyclical role (e.g. picking up building slack during market downturns) and in signaling that the industry as a whole can continue to expand rapidly with a degree of confidence.
You're absolutely correct when you say that the 20% non-market apartments are being subsidized by the 80% market apartments. It's like a tax on new housing, except that it's in-kind instead of in cash. Like any tax on new housing, it makes fewer projects economically viable.
In the specific case of the Broadway corridor, I think it's a reasonable approach, because there's a lot of old low-rise rental buildings from the 1960s and the 1970s in the area, and keeping the existing renters from being displaced as the old buildings are redeveloped over the next few decades is going to be a huge challenge. The basic idea is that you take an old low-rise, replace it with a new high-rise with a lot more apartments, and then the existing renters can return at their old rents in the 20% non-market apartments.
This also gives projects an incentive to first redevelop sites where there aren't any existing renters, so that they don't take on the cost and responsibility of relocating renters.
Another way to acquire non-market housing, instead of building brand-new apartments, is to buy older, cheaper market housing and turn it into non-market housing. BC's set up a $500M Rental Protection Fund to do this.
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Shane Phillips' The Affordable City provides a good explanation of non-market housing policies like inclusionary zoning (requiring a certain proportion of non-market housing) and density bonuses (allowing more height for projects which include non-market housing), in the sections on "stability" and "subsidy."
In the mid-1990s, the Chretien government ended federal spending on social housing. (At the time, the federal deficit was a major challenge, with one-third of all federal revenue going straight out again as interest on the federal debt; the finance minister, Paul Martin, cut both provincial transfers and federal spending by about 20%. See John Richards, Retooling the Welfare State.) The 2017 National Housing Strategy allocated $15B in new federal funding for social housing, for the first time in more than 20 years, with grants and loans to build up to 60,000 new apartments and to repair and sustain 240,000 existing apartments.
Last week the BC government announced that it was allocating $71M from the Rental Protection Fund to help the non-profit Community Land Trust of BC with the $125M purchase of two co-ops in Coquitlam (290 homes in total) whose land leases had expired in October 2022.
An earlier story, from July 2022: BC Housing and City of Burnaby acquire three existing towers with 425 homes. Total cost was about $160M. Background story: Burnaby co-op board rejects huge rent hikes pitched by union pension plan landlord.
The master plan for the Skeena Terrace social housing project, north of the Rupert SkyTrain station, was approved unanimously by Vancouver city council in July 2022, in less than half an hour. This is a BC Housing project. The site currently has 230 social-housing apartments. After redevelopment, it’ll have 1900 apartments, including low- and mid-rise buildings as well as three high-rises. 30% will be market rentals, and 70% will be social housing. BC Housing. Daily Hive. A more recent story: CBC News. Last week city council voted unanimously to refer the rezoning to a public hearing.