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Parliamentary Research Branch |
PRB 99-1E HOUSING AND PARLIAMENTARY ACTION Prepared by: Although the Constitution grants the provinces authority over housing policy and programs, all levels of government in Canada are involved in housing. The policies and programs that have evolved address the quantity, quality and cost of housing. Prior to 1970 virtually all housing policy was federal. Government programs assisted a little over one-third of housing starts, fewer than 5% of which were directed toward low-income housing. During the 1970s, federal assistance increased to 40% of housing starts. By 1986, government programs had dropped to 14% of housing completions and 8% of this federal assistance was directed toward low-income Canadians. Three federal Acts passed in the 1930s were intended to increase housing stocks so as to ease shortages and to promote job creation through stimulating the private housing market. The Dominion Housing Act (1935), the first national housing legislation, provided $20 million in loans that helped to finance 4,900 units over a three-year period. The 1937 Federal Home Improvement Plan subsidized the interest rates on loans for housing rehabilitation to 66,900 homes. The 1938 National Housing Act (NHA) helped to enable the creditworthy to buy houses, make low-income housing sanitary, and modernize existing housing stock. The Act also provided for construction of low-rent housing. During the Second World War, the federal government created a Crown corporation, the Wartime Housing Corporation, which built 45,930 housing units over eight years and assisted in the repair and modernization of existing houses. In 1946 its assets passed to the Central Mortgage and Housing Corporation (CMHC), later the Canada Mortgage and Housing Corporation, to provide home buyers with mortgages at favourable rates. Today CMHC is the main agency responsible for administering housing policy at the federal level. In 1949, the NHA was amended to provide for joint federal-provincial programs to construct publicly owned and provincially managed housing for low-income families, the disabled, and seniors. In 1954, the federal government began insuring loans for mortgages made by private investors against borrower default. Amendments were made to the Bank Act to enable chartered banks in Canada to lend money for mortgages and to allow the federal government to reduce its involvement in lending. In 1964, the federal government introduced legislation that provided for the transfer of loans of up to 90% of the cost to the provinces for the construction of provincially owned public housing. The legislation also authorized CMHC to provide loans directly to municipal and private non-profit corporations. In Canada, almost all social housing units are owned by the provinces, municipal governments or their agencies. The federal role in social housing consists of long-term contractual commitments to share operating costs with the provinces. A 1984 CMHC review defines the objective of social housing policy as being to "assist Canadians whose income is insufficient to gain access to adequate housing by encouraging and supporting in conjunction with the provinces, municipalities and their agencies, the provision of low- and moderate-income public housing and by encouraging the establishment of non-profit and co-operative housing programs." In general terms, public housing is rental housing at less than market rent that is aimed primarily at low-income households comprising the working poor, welfare recipients and poor seniors. In 1994, the federal government spent $1.9 billion on more than 661,000 social housing units, including public, low rental, rural, native, non-profit, co-operative and rent supplement accommodation. During the 1970s, incentives to stimulate home buying and home and neighbourhood rehabilitation were introduced. They included tax-exempt Registered Homeownership Savings Plans, the Assisted Homeownership Program, and amendments to the Income Tax Act that excluded principal residences from capital gains tax. Federal funds were also directed toward residential rehabilitation assistance, neighbourhood improvement and home insulation programs. The rehabilitation and home improvement funds assisted homeowners and landlords to upgrade 315,000 homes between 1974 and 1986. It was also during the 1970s that all provinces established housing departments and began taking on a stronger role in housing policy development and priority setting. The public housing constructed prior to the 1970s was 100% geared to income. The result was the formation of ghettos of poverty that were unpopular with both tenants and local communities. Amendments to the NHA introduced in 1973 provided financial assistance for new home buying, loans for co-operative housing, and low-interest loans of up to 100% of a project’s value for municipal and private non-profit housing. One of the thrusts of the legislation was to integrate different income levels within housing projects so as to encourage dispersion of low-income families within the community. One of the consequences of the income-integrated projects, however, was that two-thirds to three-quarters of the housing went to middle-income families while many families in need were not accommodated. At the beginning of the 1980s, three temporary federal programs were introduced to assist middle-income families. The Canadian Home Ownership Stimulation Program provided grants to home buyers. The Canada Mortgage Renewal Plan assisted homeowners in paying the portion of their mortgage and property tax that, as a result of mortgage renewal at higher interest rates, caused their payments to exceed 30% of their income. The Graduated Payment Mortgage Plan helped homeowners to reduce their monthly mortgage payments. During the first five years of the 1980s, 1.7% of total federal government budget went to housing. During the latter half of the decade, this figure dropped to 1.4%. Of all the program areas of the federal government, housing has had and continues to have one of the smallest expenditures. Most of the decline in housing expenditures during the 1980s was in market housing (e.g. home ownership and rental construction assistance) rather than social housing programs. Over 90% of federal housing funds are spent on subsidizing social housing projects. In 1986, the federal government introduced its New Housing Directions, which made two changes related to public housing policy. Social housing was directed to households in "core need" (a shift away from mixed-income housing projects), and the delivery of social housing programs was devolved to provincial and territorial governments. In early 1992, the federal government tabled a constitutional proposal calling for an end to its financial involvement in a number of areas of provincial jurisdiction (for example, tourism, mining, urban affairs and housing). Experts in the housing field viewed this development as a blow to social housing programs. In the budget of February 1992, the federal government terminated its federal co-operative housing program. Over its lifetime, the program had built nearly 60,000 homes for low and moderate-income Canadians. A little over a year later, in its April 1993 budget, the federal government froze expenditures for social housing and restricted its future financial support in this area to 1993 levels. The 1995 federal budget proposed a 6% ($128-million) decline in CHMC spending by fiscal year 1997-98. Because more than 90% of federal support for housing is directed at social housing programs, this sector will be the one most affected by the reduction in federal funding.
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