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Back When Ottawa Created a Housing Agency for All Canadians

Before it was mainly mortgages, CMHC was about putting people in homes. First in a new series.

David P Ball 12 Oct 2015Tyee Solutions Society

David P. Ball reports on affordable housing for Tyee Solutions Society. Send him tips or comments by mail, find him on Twitter @davidpball, or read his previous reporting published on The Tyee here.

This series is produced by Tyee Solutions Society. It was made possible through the support of the Real Estate Foundation of B.C., the Catherine Donnelly Foundation, Vancity Credit Union, the Aboriginal Housing Management Association, the Vancouver Foundation, and in partnership with Columbia Institute. TSS funders neither influence nor endorse the particular content of TSS reporting. Other publications wishing to publish this story or other TSS produced articles, please visit for contacts and information.

It was the year 1946 that reality set in for Canada after the euphoria of helping win the defining combat of the 20th century. Suddenly tens of thousands of battle-weary soldiers, sailors, aviators and support men and women were coming home to make a belated start on family life.

Canada had nowhere near enough housing for everyone. And not much new had been built outside of military bases during the six years of the Second World War. What to do?

Prime minister William Lyon Mackenzie King, a Liberal who had led the country through the war (and still holds the record as longest-governing Canadian leader), was familiar with what a muscular federal government could accomplish. His answer to the flood of returning veterans was the creation of Canada's federal housing agency, 70 years ago this January.

The Central Mortgage and Housing Corp. (CMHC) -- later renamed the Canada Mortgage and Housing Corp. -- played a historic post-war role housing tens of thousands of new families, and then a generation later more or less invented social housing to shelter Canada's neediest.

That's not what CMHC became later, under both Liberal and Conservative governments -- or what it is now. We'll explore those versions of the venerable CMHC in later instalments in this series.

But it's worth remembering what a housing creation agency with the full weight of the federal Crown can do when there's a national will. And also how badly its good intentions can go awry.

'It was visionary'

From its inception, the corporation attracted top talent. Gary Hiscox came from Britain to join the agency in 1966. Now retired after 34 years at CMHC, he marvelled at its rapid expansion beyond housing veterans and insuring loans. "By the time of my arrival, it had created an extraordinary capacity. It was amazingly visionary," he said.

"It saw its role as a federal agency to try and improve housing conditions across the country, not just by its insured lending mechanism, but by action on a broad array of levers to bring about change."

Over its decades, the semi-arm's-length Crown agency (it has its own enabling Act) has operated scores of different programs to house Canadian citizens.

Its efforts dramatically expanded the country's stock of public and social housing for low-income people, helped young families and renters buy their first home, gave incentives to rehabilitate substandard rental buildings, and loaned money to cities to renew run-down areas and improve their sewage systems. On its 20th anniversary in 1966, CMHC built Canada's first ever co-operative housing in Winnipeg.

It doesn't do all of that anymore. CMHC's main activity today is the highly profitable business of insuring banks against mortgage losses -- a program it introduced in 1954 to help Canadians attain homeownership.

What happened 35 years ago is part of the reason why.

"At no other time in Canada's history, even the post-war years, was there so much social housing being built," recalled Ray Hession, who led CMHC as its CEO from 1976 until 1982. "Imagine it -- during that period we were pumping out something in the order of 250,000 to 275,000 houses a year."

The federal government wasn't just building social housing. CMHC was extensively engaged in what Hession calls "social programs in the housing domain." And it was well funded: his first budget was roughly $1.6 billion, huge for that time and the equivalent of $6.5 billion today when adjusted for inflation.

That's triple the agency's current $2.1 billion, frozen for the next four years.

Hession, who now runs Ontario's electronic health record system, eHealth, recalls as particularly "profound" the welcome for CMHC's investments in housing Aboriginal people, particularly off-reserve, and assisting in the "extraordinarily expensive" cost of housing in the far North.

"People who live in those climates have to live there," Hession said. "It was an enormously satisfying experience."

Equally long-lasting things were being done in the south. Hession was hired in a climate of high inflation and high interest rates. Governments saw home-building as a way to break free of "stagflation."

CMHC provided financial backing, mortgage subsidies and operating assistance to hundreds of co-operatives and a wide-range of social housing projects from coast to coast. Most of those agreements are still in place, although the current Conservative government has served notice it will let them expire over the coming years.

Creativity was encouraged, recalls Michael Geller, who worked for the agency as an architect-planner and later social housing program manager between 1972 and 1981. For a while he led a "demonstration group" that CMHC tasked with developing experimental model communities across Canada. "The idea was to demonstrate new forms of community development."

"Not all of our projects worked," he said. A notable flub was an attempt to make snowy Revelstoke, British Columbia a walking-friendly community by narrowing its streets. That lasted until the first heavy dump made its impracticality obvious.

But successes were plenty, including the earliest Canadian experiments with energy efficiency. "We were a bit ahead of our times," Geller boasted, "and we were conscious of that even then."

The high point came in 1977, when Geller got to work on an experiment in creating a liveable mixed-income community that survives today, in Vancouver's False Creek South.

CMHC's own 'sub-prime' disaster

The unnoticed beginning to what would prove to be one of the agency's lowest points came the following year. In 1978, CMHC allowed an offer called the Assisted Home Ownership Program (AHOP) to wind down. It had provided interest rate subsidies to first-time homebuyers.

Like America's affair with sub-prime mortgages, this seemed like a way to put more people into their own homes. But just as the once-popular AHOP expired, interest rates began a relentless escalation that by the early 1980s would briefly carry them above 20 per cent. Banks, keen to reduce risk, abandoned long-term fixed-rate mortgages in favour of shorter terms that better reflected the spike.

Many of the families who had been coaxed into buying by CMHC's rate subsidy saw their rates double -- reflected in suddenly higher monthly payments. "That's quite a hit on anyone's income when you're a start-up young family whose incomes aren't growing at that rate," former CEO Hession said.

It was a high -- or low -- point for federal activism in housing. On the one hand, Hession recalled, "CMHC's Assisted Homeownership Program had the regrettable effect in some markets of people simply walking away. They couldn't sustain the payments when their mortgage rolled over."

On the other, through its sideline created in 1954, "all of a sudden (CMHC's) mortgage insurance business found itself taking back all these homes across Canada. Stocks of housing which were originally meant to house young families... became a burden on the mortgage insurance fund."

Investors who had financed developments lost their money as projects sat empty for lack of buyers.

The lesson for Hession: "That's what happens when you get into those kinds of distortions in the market. On one hand, CMHC was a social agency. But on other hand it was running a business... creating capital for urban housing developments. These two things got intermingled, and that's dangerous."

CMHC continued to build and invest in social housing for another decade. But the spirit of creativity, and the appreciation that a home isn't just four walls and a roof but a place in a community, was never recovered.

"After I left, the biggest change was that CMHC basically got out of (creating) housing, let alone housing for those who could not afford to house themselves," Geller said.

That story continues Wednesday.  [Tyee]

Read more: Housing

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