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Federal Politics

From Housing the Neediest to Serving the Home-Selling Industry

Canada's public housing agency, CMHC, has come a long way in 25 years.

Katie Hyslop 14 Oct

Katie Hyslop reports on affordable housing for Tyee Solutions Society. Follow her on Twitter @kehyslop.

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.

Once upon a time, Canada's most powerful national institution for putting a roof over people's heads, the Canada Mortgage and Housing Corporation (CMHC), applied itself to housing all Canadians, not just homeowners.

During the 1970s and 1980s, CMHC remade Canada's housing market -- for better and sometimes for worse. It financed unprecedented social housing construction, while tinkering with incentives to make single family homes more attractive to middle class buyers.

CMHC "used to fund a wide range of programs that explored and transferred innovation about housing across the country," said Michael Geller, the Crown corporation's social housing program manager between 1972 and 1981.

But the fairy-tale beginning to this story was in a different Canada. The evolution to the country -- and CMHC -- we know today began a quarter-century ago.

Progressive Conservative prime minister Brian Mulroney held the reins. Over his six years in office, CMHC had slashed support for co-ops and cut its yearly investment in social housing by almost half a billion dollars. Even so, as late as 1989 CMHC was still building 20,000 to 30,000 new social housing units annually.

Under every party since, Canada's government has staged a steady and sometimes stealthy retreat from the housing crisis that now faces not only the marginal and disadvantaged, but a growing portion of urban dwellers earning anything less than above-average incomes.

National leaders have left social housing as much as they could to the provinces, while catering increasingly to better-off Canadians who already own or buy a home, and the banks that profit from loaning them money.

Not that things were perfect 25 years ago. In 1990, two Liberal MPs, Paul Martin and Joe Fontana, reported that shelter was costing 1.3 million Canadians -- or 4.6 per cent of the population -- the median cost of suitable shelter in their city was 30 per cent or more of their income, the benchmark for what CMHC considers to be "core housing need," or affordable.*

"The federal government has abandoned its responsibilities with regards to the housing problem," Martin and Fontana thundered in a press release.

Today, over 12 per cent of all Canadians -- more than one-quarter of renters and 6.5 per cent of homeowners -- are in "core housing need."*

The hand-off manoeuvre

In fact, Ottawa hadn't so much abandoned the inadequately housed as it had handed them off to the provinces, along with much else.

Eager to line up support behind its trade and Constitutional goals, Mulroney's government had been giving up authority over environmental protection and natural resources as well. In 1986, it turned management of new social housing over to the provinces if they chipped in 25 per cent of its cost.

Martin and Fontana's charge was forgotten in the horse-trading that surrounded Mulroney's attempt to secure the so-called "Charlottetown" Constitutional Accord. It would have handed social housing entirely to the provinces. But Canadians rejected the accord in a referendum in late 1992.

The following year, the P.C. government froze spending on social housing, leaving provinces fully on the hook for cost increases on existing projects and to fund any new ones.

In fall 1993, Canadians stripped Mulroney's party of all but two of its 156 seats in the House of Commons.

Frightened by the ferocity of that judgment after eight straight years of deficits, new prime minister Jean Chrétien's Liberal government "got the neo-liberal religion," said David Hulchanski, a professor of housing and community development at the University of Toronto.

The Liberals had campaigned on renewing social housing spending. Martin, now minister of finance with a mission to tame the deficit, left the Conservative freeze in place. Twenty-two years later, it has never been lifted.

In 1996, Ottawa transferred what was left of its social housing projects to the provinces. (After negotiations, co-ops were devolved to the Co-op Housing Federation of Canada.)

"It made a lot of sense," said Steve Pomeroy, a former CMHC employee and current housing researcher. Thanks to a decade of Ottawa's downloading, "the provinces had become quite competent and capable in administering [housing programs]."

There was also a hidden carrot. Ottawa wouldn't give the provinces any more money for social housing, but it wouldn't transfer any less either. Interest rates had dropped from a high of 21 per cent in 1981 -- an era when many of CMHC's social housing agreements had been written -- to around 12 per cent in 1996. Provinces could keep any money they saved from the lower rates as long as they spent it on housing. The feds dodged $1 billion in estimated costs from inflation and upgrades to aging buildings.

Not every province jumped at the offer. British Columbia refused at first because many of its 1970s-era social housing buildings were encountering "envelope problems" -- part of a decade-long "leaky condo" scandal. It negotiated a bonus payment.

As of 2013 neither Alberta, Quebec, nor Prince Edward Island had signed agreements at all.

Pivoting to the 'haves'

At the same time that Ottawa was taking CMHC out of the business of helping adequately house low-income people, it was increasing its help for wealthier, if sometimes just barely, Canadians to become homeowners.

The federal Crown corporation had been insuring mortgages against default since 1954. In 1992, it extended insurance to first-time home buyers who could muster only five per cent of a home price as a down payment, instead of the previous requirement for 10. In 1998, the program was opened to all homebuyers.

That same year saw retirement savings laws relaxed, allowing homebuyers or builders with up to $20,000 in Registered Retirement Savings Plans -- $40,000 for a couple -- to use that money both tax- and interest-free for a home purchase.

Hulchansky found that the program helped homebuyers who already earned twice as much as the group it ignored: renters. The income gap between the two grew between 1984 and 1999.

582px version of HomeForSale_610px.jpg
CMHC's priority these days is insuring banks against losses when people default on their mortgages. Defaulting buyers still lose their homes.

The number of Canadians living on the streets had also been rising since recessions in the early 1980s. By the mid-'90s, 150,000 to 250,000 people were thought to experience homelessness every year.

After six years of budget slashing, the Liberal government responded in 1999 with the Homelessness Partnering Strategy, but not through CMHC. Instead, it put $753 million over three years into shelters and transitional housing (renewed at $135 million a year for 2003-2007).

But with some experience now of rising expenses, and deficits of their own to battle, the provinces and territories pushed back. In 2001, Ottawa agreed to share the cost of new affordable housing with them 50/50, putting up $680 million in 2002/03 and bumped the next year to $1 billion annually.

But by 2005, Martin was prime minister and the Liberals were in trouble. Then New Democratic Party leader Jack Layton negotiated an extra $1.4 billion lump-sum investment in affordable housing in return for supporting Martin's minority.

Later that year the government fell, and the Conservative Party of Canada took the reins in February 2006.

Did Harper out-spend the Liberals?

They maintained the funding approved under the Liberals, dividing the money three ways over three years: $800 million distributed among the territories and provinces on a per capita basis for an Affordable Housing Trust; $300 million for an Off-Reserve Aboriginal Housing Trust; and $300 million to the Northern Housing Trust.

Indeed, over the next nine years the Harper government would promise more money for social housing than the Liberals had in their last decade in power.

In response to the 2008 recession, it invested over $4 billion in housing over two years to help stimulate the economy. One billion went to build or renovate housing in the north, on reserves, and for seniors and people with disabilities; another billion went to build and renovate social housing.

The other $2 billion-plus, however, went to boost house sales and reduce homeowners' costs. A First Time Home Buyers Program provided up to a $5,000 income tax credit on a first home purchase. The RRSP withdrawal limit for down payments went to $25,000 -- $50,000 for a couple.

Altogether and on paper, Hulchanski said, it was a much bigger investment than previous Liberal governments ever made. But several ministries in the Harper government have significantly under-spent their budgets and, he added, "I've never found out if they spent it all."

In 2013 the federal government redirected $119 million previously dedicated to shelters and transitional housing to a continuation of the Liberals' Homelessness Partnering Strategy. Its "Housing First" approach focuses on housing people before working on any mental health or addictions issues.

It was back to the future again last year, when the Conservatives introduced a near copy of the Liberals' old 50/50 cost-sharing scheme for affordable housing. The Invest in Affordable Housing program will put $253 million a year, matched by provinces and territories, into local initiatives of their choice for five years.

The Conservatives have pledged six times that amount ($1.5 billion over 2016/17) if they are re-elected, to save homeowners anywhere from $1,000 to $5,000 on home repairs and upgrades, by reinstating a lapsed Home Renovation Tax Credit.

Owning, not housing

CMHC has little role left in meeting its former mandate to help all Canadians find suitable housing.

Until last year, it continued to spend almost $2 billion a year subsidizing nearly 600,000 social housing units it helped create three and four decades ago. But the first of those commitments expired in 2014, and the Conservative government is not renewing any of them.

With their expiry, some social housing providers have kept going by selling off units, charging market rents, or creating social enterprises to fund their activity. Others have closed their doors. CMHC's social housing budget is anticipated to zero-out entirely by 2040.

Its focus today is mortgage insurance -- backstopping banks against homeowners who default (although home buyers cover the premiums).

The business is hugely profitable for Ottawa. "In good times it makes a lot of money," Hulchanski said. "Hundreds of millions of dollars annually that transfer to general revenues."

Of course if times turn bad, the federal government pays out, but it's banks that get the bailout. People who default still lose their homes.

"The federal government has had, for many years, an obsession with the ownership market," lamented Michael Shapcott, co-author of a book on homelessness. That obsession has come at the cost of its former ability to help all Canadians.

The last legacy agreement from the fairy-tale years of CMHC's housing activism still has 18 years to run. But the agency is already out of the social housing business, and into the business of backing banks.

With files from David P. Ball.

This Friday: What Canada's housing agency could do today for housing-insecure Canadians. Last in Tyee Solution Society's three-part series on CMHC.

*Story corrected Oct. 27 at 11:45 a.m.  [Tyee]

Read more: Federal Politics, Housing

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