BP-229E

TABLE OF CONTENTS

INTRODUCTION

CANADIAN POST-WAR HOUSING SITUATION (1941-1987)

HOUSING POLICY STUDIES OUTSIDE CANADA (1988-1990)

   A. The UN Study (1988)

   B. The OECD Study (1988)

   C. The United States Congressional Budget Office Study (1988)

   D. The United States National Housing Task Force Study (1988)

   E. The Bush Administration Proposal (1990)

SPECIFIC ISSUES

   A. Senior Citizens

   B. Homeless Persons

   C. Affordability

CANADIAN HOUSING POLICY INITIATIVES SINCE 1985

SELECTED REFERENCES

APPENDIX I: PRESENT FEDERAL HOUSING POLICY, MAIN PROGRAM ACTIVITIES, 1996

APPENDIX II: CANADIAN COUNCIL ON SOCIAL DEVELOPMENT (CCSD):
METHODOLOGY FOR STUDY OF SHELTER USE, 22 JANUARY 1987

APPENDIX III: PRICE INDEXES FROM 1987 TO 1996

HOUSING:  CURRENT ISSUES

There are almost 10 million dwellings in Canada, over 63% of which are owner occupied. Annual construction, in the neighbourhood of 150,000 units,(1) represents just over 1.5% of the housing stock. While in almost all cases housing is provided by the private sector, governments at all levels are actively involved through policies such as building codes, zoning regulations, financial incentives, and direct participation and management. General federal policies such as monetary policy and tax regulations also have a significant impact on both the supply and demand sides of the housing market. Table 1 indicates that, in comparison with other OECD countries, Canada’s level of involvement is high level in subsidization and low in credit control, government loans, and construction.

Housing policy priorities have varied as much with analysts’ theories as with resources available. After World War II, emphasis was placed on housing for returning soldiers. In 1946, the Central Mortgage and Housing Corporation (CMHC, now the Canada Mortgage and Housing Corporation) was established to administer the 1944 National Housing Act (NHA). CMHC made mortgage loans and became involved in public housing construction.

By the mid 1950s, CMHC had replaced direct loans with the Mortgage Loan Insurance Program, which provided the foundation for a private mortgage market in Canada.

Key: H = High; M = Medium; L = Low

A shortage of serviced land, a major issue during the 1960s, was addressed by means of government loans to municipalities to develop local infrastructures under the 1960 Municipal Infrastructure Program. In the same decade, the federal government used the housing industry to fight seasonal unemployment by means of its Winter House Building Incentive Program. Urban renewal was also a target of significant public spending.

By the 1970s, emphasis had been placed on the rising cost of housing in rapidly growing urban areas and affordability of urban housing for low-income households. This issue has remained central and has been joined by others such as energy conservation, the needs of special groups, and homelessness. During the 1980s and 1990s, preoccupation with balancing budgets and the public debt forced the federal and provincial governments to re-examine many of the accepted ideas about the post-war welfare state, and to adjust their program spending accordingly. Universal standard housing programs have gradually been replaced with more limited measures that are better adjusted to the circumstances of beneficiaries and more concerned with effectiveness and equity.

The goal of federal policy has, however, remained consistent over time: to establish a housing policy that will enable all Canadians to have decent, adequate, affordable housing. The problem is that the terms "enable," "decent," "adequate," and "affordable" are all subject to a wide variety of interpretations. Table 2 shows how housing conditions in Canada changed according to specific criteria between 1941 and 1991.

This paper outlines current housing issues and policies in Canada and reviews possible new initiatives suggested by the experience of other countries and the advice of various advocacy groups. It also studies current wisdom with respect to terms such as "affordability."

After 1941, the post-war baby boom, high immigration, increased life expectancy, rising real incomes, individuals’ desire for separate accommodation, and the population shift to urban areas, particularly in central Canada and British Columbia, led to a dramatic increase in the quality and quantity of both owned and rental housing, largely on the private market. A broad range of government policies not explicitly related to housing, such as income maintenance programs for senior citizens and the unemployed, enabled low-income households to spend more of their incomes on housing.

Federal housing policies also significantly affected the changing post-war housing situation. Two basic issues were addressed by these policies: the ineffectiveness that prevented the private housing market from producing an adequate supply of housing; and the principles of basic human rights, social justice, and redistribution. The first issue was addressed by giving priority to mortgage loan financing; the second, by establishing policies for assisting low-rental housing and low-income home owners.

In a 1987 retrospective,(2) CMHC concluded that national strategies were not always appropriate and indicated that policies and programs should be geared to specific local housing conditions, which are not uniform in all parts of the country. A second lesson drawn from the post-war experience was that policies designed to solve housing problems are very costly. For example, when an individual moves from shared family housing to publicly assisted housing, the government must assume housing costs formerly paid by the family. Policies that encourage independent living may thus put considerable pressure on the public purse.

It became clear that where housing adequacy is concerned, there are no objective answers; housing adequacy is a relative issue and must be judged according to a specific set of goals. For example, in 1985, a CMHC concluded that 700,000 households had housing problems.(3) These households could not afford accommodation that was physically adequate (with basic facilities) or uncrowded (with one person or less per room) without paying more than 30% of their income. Of these households, 20% were living in substandard housing (without basic facilities such as running water); 500,000 were renters; and 150,000 of the 200,000 owners were living in rural areas. By simply changing the definition of crowding, the threshold portion of income spent on housing, or the geographic boundary of housing markets, however, these numbers can be dramatically increased or decreased. For example, households with the same income level could be considered as needy in Toronto but as having no housing problems in Belleville.

Another normative issue is the social integration of differing income and age groups. Integration efforts were found to have proved divisive in some cases and expensive in others. The 1987 CMHC study concluded that there was "surprisingly little evidence of the extent to which current social-mix policies actually result in such benefits" as improved social justice and compassion (page 17). Limited resources have also led to a return to targeting or restricting assistance to the needy; this emphasis may hinder social integration, since non-needy households no longer receive assistance to live in mixed developments.

In the late 1980s, the UN, the Organisation for Economic Co-operation and Development (OECD), the United States Congressional Budget Office, and a United States National Housing Task Force all published reports on issues relevant to the housing situation in Canada at that time. The Bush administration also submitted a new housing proposal to the United States Congress.

   A. The UN Study (1988)(4)

This study, conducted in the late 1980s, noted that housing policies had been subjected to increased scrutiny in all developed countries as governments sought greater economy and better value for money spent. Many housing market distortions were noted and linked to various government policies. For example, relief for home owners was seen to be regressive and to encourage overconsumption of housing by the rich; rent controls were seen to discourage investment in rental markets, to hinder the mobility of households living in rent-controlled housing, and generally to benefit persons not poor enough to need housing assistance. In most countries, new investment in public housing had been sharply curtailed because of budgetary constraints and a growing disillusionment in some countries about its effectiveness in meeting the housing needs of low-income households. Rent supplements had also become increasingly popular, as being easier to direct and more cost-effective than other programs.

This study identified New Zealand as the country that had undertaken "what is probably the most far-reaching and comprehensive housing policy reform attempted anywhere in the developed market countries during the 1980s" (page 49). Briefly, housing reforms in New Zealand had led to need-based assistance and tenure-neutral programs. Rent controls and mortgage loan interest relief were eliminated and replaced with direct income-related assistance for low-income owners and renters. These reforms, along with increased investment in public housing construction, low-interest loans to low-income home buyers, and a marginal tax rate of approximately 30%, the lowest of all developed market economy countries, made affordability the focus of New Zealand’s housing policy.

   B. The OECD Study (1988)(5)

The OECD study dealt with urban housing financing, particularly policies for owners and renters; organizations and instruments for financing mortgage loans; and housing reinvestment programs.

Owner occupation was viewed favourably in most countries, with some, such as the United Kingdom, actively encouraging its expansion and others, such as Canada, being more neutral in the treatment of tenure groups. Various policies influencing tenure choice included (i) low interest loans (Japan, Germany, New Zealand, Sweden); (ii) tax expenditures related to mortgage loan interest payments and imputed income (see Table 3 below); wealth and capital gains (tax-exempt in practically all countries); property (frequent property tax breaks); sales (sales tax exemptions of various magnitudes); and income from savings (such as Canada’s now defunct Registered Home Ownership Savings Plan).

The OECD study, after examining the effectiveness and equity implications of these policies, concluded that assistance should be far more selective and carefully targeted. In many countries, relatively affluent longstanding owners were found to be the main beneficiaries. It was suggested that a more cost-effective approach would be to target low-income households, first-time buyers, those with special needs, and upgraders of substandard housing. In all cases, two complicating factors had to be noted: first, current income might not reflect life cycle ability to pay (in other words, aid should be related to longer-term income); and, second, income-related housing assistance should be co-ordinated with non-income related benefits in order to avoid creating a poverty trap (in other words, incentives should not discourage people from giving up government support).

With respect to mortgage loan financing, the mortgage market experienced severe strains in the 1970s and 1980s, particularly from inflation and interest rate volatility. The market response was to increase down payments, thus putting a heavy burden on first-time buyers. In addition, lending institutions adopted variable rate mortgages, long-term loans on which the interest rate changed during the term, possibly leading to cash flow problems for low-income households. These institutional developments, along with the rapid expansion of secondary mortgage markets by means of mortgage-backed securities in the United States and Canada, had made the housing market attractive to investors with money to lend, but had also increased housing financing costs.

The rental sector was still large in all OECD countries, larger in fact than the owned sector in France, Germany, the Netherlands, and Sweden. The OECD group examined the claim that investment disincentives, misallocation of resources, inequity, and excessive administrative costs were caused by rent controls. The OECD study emphasized that rent control was not the single cause of all these failings, but one of several contributing factors including: the growth of alternative investment opportunities for small savers who might formerly have invested in housing; the relatively unfavourable tax treatment of rental housing investment in some countries; and growing demand for owned and social housing. This study recommended gradual de-control and a system of housing allowances based on household income and family size. In the United States, reliance was found to be shifting to housing allowances or vouchers and away from other forms of housing assistance.

The final issue addressed in the OECD study was housing reinvestment policy. The finding was that existing housing stock should be maintained or upgraded and spending should be directed toward maintenance, renovation, rehabilitation, modernization, and urban renewal. These could be cost-effective ways to meet demand for good quality housing in areas of decay, where the cost of new building was prohibitive. Rent control was identified as a factor accelerating the rate of decay by reducing landlords’ rate of return. Many countries (Australia, Canada, Finland, Greece, Japan, Spain, Sweden, and the United States) provided loans for housing rehabilitation at below-market interest rates and, in France and the United Kingdom, for example, grants to supplement this loan assistance. Some countries allowed tax expenditures such as deductibility of tax on housing reinvestment expenditures. Where problems of substandard housing were more extensive, some countries (such as Portugal and the Netherlands) acquired housing tracts in order to organize housing reinvestment themselves. However, this approach, similar to the now defunct urban renewal programs in the United States and Canada, was found to be relatively expensive.

   C. The United States Congressional Budget Office Study (1988)(6)

The Congressional Budget Office study described United States federal rental assistance to very low-income renters at the end of the 1980s. Two basic approaches were used: project-based assistance, which could involve new construction or substantial rehabilitation; and household-based assistance, which provided renters with the resources to choose rental dwellings in the existing housing stock. Low and medium-income households also received some assistance in becoming home owners through assistance that reduced their effective mortgage loan interest rates to as little as 1%. From 1978-1988, however, assistance to new home buyers decreased overall, as did production-oriented rental assistance. By the late 1980s, greater emphasis was being placed on existing housing and voucher programs. As well, Congress steadily shifted funding away from new construction and toward rehabilitation. At the beginning of 1977, 34% of all assisted households received home ownership assistance; in 1988, fewer than 20% did so. Where rental assistance was concerned, in 1997 13% of renters received assistance for existing housing but by 1988 this figure had increased to 34%. In addition, over the same period, the proportion of renters receiving household-based assistance increased from 8% to 22%.

   D. The United States National Housing Task Force Study (1988)(7)

After an intensive study of conditions and policies in the United States, the National Housing Task Force presented a plan to provide decent, affordable housing for every American by the end of the century. The core of the 10-point plan was a system to stimulate local production, renovation and conservation of affordable housing through the co-operative efforts of federal, state and local governments. A housing opportunity program, funded by a federal block grant and partly matched by state and local contributions, was to finance the construction, renovation or acquisition of up to 200,000 additional buildings annually for low-income households. Emphasis was placed on the existing housing stock. The federal government was also called upon to provide adequate rental assistance to those unable to own homes. The report was much more a statement of principles than a set of concrete proposals.

   E. The Bush Administration Proposal (1990)(8)

The Bush administration proposal, the Home Ownership and Opportunity for People Everywhere (HOPE) Bill, had four parts:

(i) grants to help public housing tenants purchase their apartments, and grants to other low-income households or non-profit groups in order to encourage home ownership;

(ii) protection of low-income renters from sudden rent increases in federally subsidized dwellings covered by the Congress-imposed moratorium on mortgage prepayments, which was to expire on 30 September 1990;

(iii) rental assistance and support services to homeless persons who were seriously mentally ill or who had alcohol and drug problems; a demonstration program to investigate the effectiveness of combining housing vouchers with support services in order to help senior citizens continue to live independently; and

(iv) designation by the Secretary of Housing and Urban Development (HUD) of 50 Housing Opportunity Zones, in order to encourage regulatory reform; for example, revision of outdated building codes, designed to spur affordable housing construction.

If purchasers of dwellings covered by this proposal decided to sell, they would be required to sell the dwelling back to the tenant organization overseeing the project for an amount equal to the initial down payment plus the cost of improvements and inflation. This arrangement would allow dwellings to be sold to other low-income households.

This bill was the subject of intense debate and change as it made its way through Congress. Various objections were raised to it from the start: inadequate support for low-income renters; unfair resale restrictions; and inadequate funding.

From a conceptual perspective, there is limited theoretical or empirical evidence that home ownership by low-income households is viable in the long term without public assistance.

Thus far this paper has addressed general housing policies for assistance to home owners and low-income households. This paper will now address three specific aspects of housing that are subjects of ongoing public debate: housing for senior citizens, housing for homeless persons, and housing affordability.

The aging of the population is not a new phenomenon but public concern about it is relatively recent. Society has always had to make provision for old age, but until the 1950s and the introduction of the Old Age Security Act and the Old Age Assistance Act, old age was primarily a private responsibility in Canada. Persons aged 65 and over account for just over one in 10 Canadians today; by 2030, this proportion is expected to rise to one in five. There will be increasing pressure to expand available services, including housing.

Among Canada’s older senior population (persons aged 75 and over), Statistics Canada has identified a major change in living arrangements.(9) Since 1971, the number of older senior men and women living alone or in institutions providing some level of custody or care has increased very rapidly. The proportion of men living alone increased from 13% in 1971 to 17% in 1986, while the proportion of women living alone increased from 26% to 38% over the same period. The proportion of men living in institutions has increased from 9% to 12% since 1971; the proportion of women, from 14% to 19%. It is projected that, by 2001, 35% of persons aged 75 and over will be living alone. If the independence of these people is to be preserved, this trend has implications for services provided to them, such as care, security, transportation, and social support. Table 4 indicates the relatively high proportion of income spent on housing by older seniors.

Source:  Statistics Canada, Census of Canada, 1986.

To some extent, these figures overstate the financial burden since they ignore financial holdings and other accumulated assets. Generally, persons aged 65 and over have more such assets than do younger people. Of families headed by a person aged 65 or over, 80% own their homes, in comparison with 71% of all families. Further, 91% of senior home-owner families are mortgage free, in comparison with just 48% of all home-owner families.

CMHC is carrying out research designed to improve senior citizens’ access to appropriate and affordable housing. The term "appropriate" means that health services are provided and social needs met; the term "affordable" means that many senior citizens can meet their housing needs without financial assistance. Two-thirds of persons aged 65 and over still live in their own homes, and various approaches, including reverse mortgages, sale leasebacks, and deferred payment loans, have therefore been suggested to allow them to tap into their home equity. On 8 March 1990, Security Life Insurance Company of Toronto announced the Security Life Home Equity Plan, which allows senior citizens to use their houses as collateral to borrow money in either lump sums or monthly payments, while continuing to live in them. Interest payments accumulate until the home owner dies or the home is sold. The home owner owns any growth or equity and the company guarantees a certain amount of equity to the plan owner’s estate. Only proceeds from the home can be used to pay off the outstanding mortgage; the company absorbs the loss if the value of the home is insufficient. Revenue Canada is to rule on whether the loan payments are tax free; its ruling on a similar plan in British Columbia was favourable.

New types of tenure, such as life tenancies and shared equity leases, are designed to reduce the initial capital needed to purchase a new dwelling. The problems of poor senior citizens without assets are quite similar to those of low-income households in general, and similar policies will often be appropriate. Various other options have also been suggested, including home sharing, self-contained accessory apartments, garden suites or "granny flats," retirement villages, and life care facilities.

The basic issues in housing for senior citizens are the same as those in housing for low-income households. Does the problem lie with housing or with low income? If the government decides that housing assistance is appropriate, what form should it take, and what would be the constraints on resources?

In 1981, during its 36th session, the UN General Assembly designated 1987 the International Year of Shelter for the Homeless in order to focus world attention on shelter for the poor. Between 1981 and 1987, a number of studies were carried out in Canada, the United States and most other countries in order to consolidate and share new and existing information on the subject. Where homeless persons in Canada are concerned, two fundamental questions must be asked:

• Who are they?

• Why are they homeless?

Unfortunately, these questions are not easily answered. Since there are no unambiguous definitions of homelessness, it is difficult to come up with generally accepted estimates of the numbers of homeless people and the causes of their situation. For example, a 1988 Ontario Ministry of Housing study(10) defined homeless persons as those living on the street and unable to find adequate and affordable permanent accommodation. Clearly, by varying the definitions of the terms "adequate," "affordable," and "permanent," a wide variety of figures can be generated.

On 22 January 1987, the Canadian Council on Social Development (CCSD) conducted an informal survey of 1,000 agencies such as hostels and transition facilities providing services to persons in need of shelter.(11) Table 5 provides information about the 7,751 persons who on that date stayed in the 283 shelters that responded to the survey.

On the basis of this survey, the CCSD estimated that there were between 130,000 and 250,000 homeless persons in Canada in 1986. This figure is roughly equal to some estimates of the total number of homeless persons in the United States, a country with 10 times Canada’s population (see Appendix II for more details on the CCSD methodology). Since the characteristics of persons in shelters are quite varied, it is unlikely that a single policy for homeless persons would address all their problems. In fact, it is not clear that housing is the issue that needs to be addressed. Similar conclusions have been drawn in the United States.

As is the case in Canada, homelessness has been receiving increasing attention in the United States. A survey by the United States General Accounting Office(12) identified various factors contributing to homelessness: alcohol and drug abuse, increased unemployment in the late 1970s and early 1980s, inadequate community resources for the mentally ill, increases in personal crises, cuts to social assistance, and a decline in the number of low rental dwellings. Except with respect to the characteristics of homeless persons, there is very little agreement among social scientists on the relationship between homelessness and housing markets (that is, the contribution of rent control, low vacancy rates, or various housing policies to the problem) and whether things are getting worse.(13)

What about the magnitude of the problem? As in Canada, it is very difficult to come up with sound estimates. The U.S. agency Housing and Urban Development (HUD) suggests that there are 250,000 to 300,000 homeless persons in that country; Peter Rossi, author of a study on homelessness, suggests there are between 250,000 and 350,000;(14) the Urban Institute estimates close to 600,000; and advisory groups such as the National Coalition for the Homeless estimate about 3 million. The HUD and Urban Institute estimates are based on surveys of shelters and soup kitchens; the estimates of Rossi and advocacy groups try to include persons who do not use shelters. In an attempt to resolve these discrepancies, from 6:00 p.m. on 20 March 1990 to 4:00 am the following morning, the United States Census Bureau took a head-count of persons sleeping in streets, alleys, doorways, and shelters. This operation counted 230,000 homeless persons, almost 179,000 in shelters and 50,000 on the street. These figures have generated considerable controversy and to date there have been no studies of their accuracy.

United States federal policy response to homelessness has been primarily to supplement more substantial state, local and private efforts. Most studies reviewed by the General Accounting Office recommended that longer term strategies focus on community-based services. These solutions are likely to be expensive, however, and the effectiveness of existing programs remains to be demonstrated.

Housing affordability for senior citizens, low-income households, and new households is the common thread running through all discussions of housing policy. Appendix III provides selected data on housing prices over the period 1987-1996. In 1971, in current dollars, the median value of new NHA housing was roughly twice median urban family income; in 1989 it was about the same. What had changed dramatically were mortgage interest rates. In 1989, the typical mortgage interest rate on a five-year mortgage from a chartered bank varied between 11.75% and 12.75%; in 1971, it had been approximately 9%. This approximately 3% increase in mortgage interest rates dramatically increased the cost of purchasing a home. According to a 1985 government paper:

Between 1971 and 1981, when average mortgage interest rates and average home prices rose dramatically, the percentage of renters of primary home buying age, 25 to 44 years, able to afford the average priced home plummeted from 50% to just 7%.

Since the peaking of interest rates in 1981, however, the average home price in Canada has risen only slightly and interest rates have declined. In 1983, then, 28% of renters could afford to buy the average priced home.(15)

According to CMHC, the percentage of renters able to afford the average-priced home without paying more than 30% of their gross income on housing fell from 23.1% to 16.6% with a rise in interest rates from 10% to 12%.

The Royal Bank has developed an affordability index showing the proportion of median pre-tax household income required to cover mortgage payments, property taxes, and utilities for a detached bungalow. This index, based on a 25% down payment and a 25-year mortgage loan with a five-year fixed rate, was estimated on a quarterly basis for each province and for the Montreal, Toronto, and Vancouver metropolitan areas. The results show that affordability is extremely sensitive to interest rates.

Thus far, this paper has focused on home owners, but for many persons home ownership is not even a remote possibility. What, then, is the situation in the rental market? In 1972, apartments made up almost half of total housing starts in Canada; by 1988, they accounted for approximately one third. The percentage of renters spending more than 30% of their income on housing also decreased overall: from 22.6% in 1982, it rose to 27.8% in 1985 but fell in 1991 to 13.6%.

Affordability problems can clearly be alleviated through some types of income transfer and rent supplement. However, other, mostly provincial and municipal, policies significantly affect housing costs. For example, Ontario requires municipalities to maintain a 10-year supply of residential land for future use; to reduce the time required to process residential applications; and to establish policies making at least 25% of new dwellings resulting from development and intensification affordable, that is, accessible to incomes up to the 60th percentile in the housing region. An alliance of builders has argued that this policy is unfair to the province as a whole since the real problem lies in the Toronto housing region. This group suggests removal of unnecessary restrictions, unauthorized land dedication, excessive levies in municipal planning and development approval processes, and disincentives to private-sector production of rental housing.

In the United States, state governments have encouraged the supply of affordable housing through innovative land use approaches such as performance zoning, under which development standards specify minimum or maximum effects of given uses. CMHC and the provincial housing agencies have been studying these approaches in order to ascertain whether they would work in Canada.

After tabling no new major housing legislation for many years, the federal government undertook the Nielsen Task Force and consultation process in 1985. The Nielsen Task Force on Program Review (Housing) looked at various programs and their beneficiaries, identifying gaps and omissions and concluding that priority with respect to social housing was being given to the supply of new dwellings rather than the use of existing ones. However, lack of affordable existing accommodation was the main problem facing low-income households. The Task Force also found social housing programs to be a costly form of assistance, entailing long-term commitments and allowing little flexibility for new initiatives. Even if all new social housing activity had ended on 1 January 1986, 1986-1987 budget spending would still have been approximately $1.225 billion. The Task Force concluded that social housing programs were not providing assistance to those most in need; it recommended that the Non-Profit and Co-operative Housing Program set up under section 56.1 of the NHA be replaced with cost-effective alternatives, including more rent supplements, renovation assistance for those most in need, and fully targeted assistance for small-scale housing projects. The Task Force also recommended continued government mortgage loan insurance and stronger federal participation in housing research and equality of access.

The persistent budget deficits and soaring public debt of the late 1980s forced the federal and provincial governments to overhaul their program spending. In view of the emphasis placed on deficit reduction, they did not make housing a focus of new activity.

In 1990, the federal government’s Expenditure Control Plan cut planned growth in funding for new social housing commitments by 15%, to $90 million in 1990-91 and to $86 million in 1991-1992; in the February 1991 budget, this cut was extended through 1995-96. Then, as part of greater program restraint, the 1992 budget imposed a 3% annual growth rate on new social housing commitments from 1992-1993 to 1996-1997, thereby cutting $622 million from social housing funding over five years. In addition, the Co-operative Housing Program was terminated, cutting a further $25 million from housing funding, though the government would continue to support the 14,000 dwellings already built under this program. It its 1993 budget, the federal government announced an annual $2-billion ceiling on funding for social housing; any new commitments were to be funded out of savings resulting from new efficiencies in the funding and delivery of social housing. Clearly, the federal government devotes considerable funding to housing, but most of this is the result of past commitments. For example, this was the case for 95% of the approximately $1.3 billion spent on social housing in 1986-1987.

The most notable measure affecting the housing industry over the past decade was the Goods and Services Tax (GST). Basically, the tax applies to all housing built in 1991 or later, and to the cost of renovations or repairs. The Manufacturers’ Sales Tax, which the GST replaced, applied to housing construction inputs and was equivalent to 4% of the price of the average new home. The government intended that the majority of new homes would have an effective tax rate of 4.5%; as the price of a home rises beyond $350,000, the effective tax rate rises gradually, to 7% for homes valued at $450,000 and up. Residential rents are tax-exempt, but materials and services used to maintain rental buildings are subject to the Goods and Services Tax.

In recessionary times, the federal government has frequently used the housing market to stimulate the economy. For example, the Home Buyers’ Plan (HBP) introduced in the February 1992 budget allows individuals to dip into their RRSPs in order to buy or build a home. Up to $20,000 from existing RRSPs can be withdrawn for a down payment on a home with no tax penalty. The money withdrawn is to be paid back into the RRSP in equal instalments over 15 years. The plan was initially to be available until 1 March 1993 but was extended to 1 March 1994; in 1994 it was replaced with a permanent program now administered by Revenue Canada. By September 1997, more than 592,000 persons had taken advantage of this program.

The February 1992 budget also announced the First Home Loan Insurance Program (FHLIP), a temporary CMHC program halving, to 5%, the down payment required on federally insured mortgages for first-time home buyers. This program was subject to certain restrictions. After being renewed several times, it was replaced with a new, permanent program allowing all home buyers, not only first-time buyers, to obtain loan insurance with a 5% down payment.

In the 1996 budget speech, the federal government announced that, except for programs for aboriginal persons living on reserves and other temporary initiatives, it would gradually withdraw from social housing. In compensation, it was prepared to give the provinces and territories responsibility for managing existing social housing, on condition that federal assistance for such housing would continue to target low-income households.

The stress is now on effective delivery of existing services and encouragement of private sector involvement through programs such as mortgage-backed securities. Where social housing programs are concerned, new arrangements for funding and delivery have been negotiated with nine provinces and the two territories. Provincial responsibilities, but not provincial resources, have been considerable increased. Appendix I shows federal housing program activities in 1996.

Despite the announced freeze in social housing funding, the federal government continues to introduce temporary measures to stimulate the economy and employment in residential renovations. In 1994, the federal government revived the Residential Rehabilitation Assistance Program (RRAP) and the Emergency Repair Program (ERP). In January 1998, the Minister responsible and CMHC announced a five-year extension of the RRAP and the ERP as well as the Home Adaptations for Seniors Independence Program (HASIP).

Canada. Consultation Paper on Housing. 1985.

Canada. Services to the Public: Housing. Study Team Report to the Task Force on Program Review, 1985.

CMHC. Housing in Canada 1945-1986: An Overview and Lessons Learned. 1987.

CMHC. A National Direction for Housing Solutions. 1986.

Economic Council of Canada. Intervention and Efficiency. 1982.

Fallis, George. Housing Economics. Butterworths, Toronto, 1985.

McLaughlin, Mary Ann. Homelessness in Canada. CCSD, 1988.

Miron, John R. Housing in Postwar Canada. McGill-Queen’s University Press, 1988.

Ontario Ministry of Housing. More Than Just a Roof. 1988.

OECD. Urban Housing Finance. 1988.

UN Department of International Economic and Social Affairs. Housing and Economic Adjustment. 1988.

United States Congressional Budget Office. Current Housing Problems and Possible Federal Responses. 1988.

United States General Accounting Office. Homelessness: A Complex Problem and the Federal Response. 1985.

United States National Conference of State Legislatures. State Policies for Affordable Housing: A Legislator’s Guide.

The overall objective of the NHA is:

to promote the construction of new homes, the repair and modernization of existing homes, and the improvement of housing and living conditions.

The following assumptions were made:

(i) the total capacity of the temporary and emergency shelter system was 13,797 spaces; and

(ii) the 77% occupancy rate of the shelters responding to the survey was applied to all other shelters.

The total number of persons housed on 22 January 1987 was 10,672, or 77% of 13,797.

Data 153 of the 283 shelters providing one-night shelter use also provided data on shelter use for 1986:

• 124 sheltered 102,819 different persons; and

• 29 provided 548,567 bed days.

Calculation Using nightly capacity and number of persons served in 1986, CCSD determined that the average number of persons sheltered over the year was 18.8 times the nightly capacity.

Assumption The rate of 18.8 applies to all beds.

Implication A total of 18.8 times 13,797, or 259,384 different persons, spent at least one night in a shelter in 1986.

Modification An individual could have used more than one shelter over the course of the year. If every person used two shelters, the number of homeless persons drops to 129,692.

Since the options available to the homeless are few, and since many homeless people do not use shelters, an estimated range of 130,000 to 250,000 homeless people during the year remains conservative.

No information was provided on the survey methodology, the characteristics of the shelters responding to the survey about 22 January 1987, or the shelters responding to other questions. As a result, it is not possible to draw any inferences about statistical validity. Further, the modification and conclusion above are pure conjecture, and no logical basis is provided for either one.

Source:   Statistics Canada, CANSIM Division; CMHC.

(2) CMHC, Housing in Canada 1945-1986: An Overview and Lessons Learned, 1987.

(3) Canada, Consultation Paper on Housing, 1985.

(4) UN, Department of International Economic and Social Affairs, Housing and Economic Adjustment, 1988.

(5) OECD, Urban Housing Finance, 1988.

(6) United States, Congressional Budget Office, Current Housing Problems and Possible Federal Responses, 1988.

(7) United States National Housing Task Force, A Decent Place to Live: The Report of the National Housing Task Force, 1988.

(8) "Kemp Outlines HOPE Proposal to Skeptical House Panel," Congressional Quarterly, 17 March 1990, p 839.

(9) Gordon Priest, "Living Arrangements of Canada's Older Elderly Population," Canadian Social Trends, Statistics Canada, Autumn 1988, p 26-31.

(10) Ontario, Ministry of Housing, More Than Just a Roof, 1988.

(11) Mary Ann McLaughlin, Homelessness in Canada, CCSD, 1988.

(12) United States General Accounting Office, Homelessness: A Complex Problem and the Federal Response, 1985.

(13) Randall Filer, "What We Really Know About the Homeless," Wall Street Journal, 10 April 1990, p. A24; and Michael H. Lang, Homelessness Amid Affluence, Praeger, 1989, provide diametrically opposing views of this issue.

(14) Rossi, Peter, Down and Out in America: The Origins of Homelessness, University of Chicago Press, 1989.

(15) Canada, Consultation Paper on Housing, January 1985, Appendix I, p 15.