Infrastructure Investment in Affordable Housing as Economic Stimulus
The Government of Canada is exploring ways to provide short term economic stimulus and support for Canadians. We recommend consideration of infrastructure investment in affordable housing as it will provide greater and longer lasting benefits to Canadians compared to other types of infrastructure investments.
The Need:
An estimated 150,000-300,000 Canadians are homeless and the annual public cost of homelessness is estimated at $4.5 billion.[1] Affordable housing with supports is five times less expensive than institutional responses to homelessness (prison, detention, and psychiatric hospitals), and about half the cost of emergency shelters.[2]
Currently more than 1.4 million Canadian households (slightly more than 10% of all Canadian households) spend more than 30% of income on housing.[3] In a recession, the possibility of job losses puts these Canadians at significantly greater risk of homelessness. Particularly vulnerable are lower income and fixed income Canadians as well as renters, female lone-parent families, seniors, immigrants and aboriginal households.
Construction investment represents approximately 12% of Canada’s annual GDP. [4] More than one million Canadians (one in 16 Canadian workers) earn a living in the construction industry.[5]Each new home built creates an estimated four to six person years of direct and indirect employment for Canadian workers.
The Recommendations:
1)Invest an additional $2.5 billion over two years to create 35,000 to 50,000 units[6] of affordable housing.
a)Affordable housing could include affordable home ownership, affordable rental, supportive housing, purchase & conversion, repair, adaptive reuse or renovation.[7]
b)Criteria for capital use to be flexible to meet local needs.
c)30% of units must be for homeless or very low income Canadians (people who can afford no more than $300/month in rent).
d)Funding would be delivered through existing mechanisms, such as the Homeless Partnering Strategy.
e)Distributed on a per capita basis at $75 per person.
2)Amend the Income Tax Act to eliminate the capital gains tax on donations of land and buildings to registered public charities for the purpose of providing perpetually affordable housing to create more affordable housing without tax leakage.
a)Possible “tax leakage” would be reduced or eliminated by:
i)restricting the registered charity’s use of capital gains exempt donations to develop the donated land or buildings as perpetually affordable housing;
ii)limiting the use of the donated land or buildings to address the housing needs of beneficiaries who meet the Core Housing Need[8] criteria as defined by the Canada Mortgage and Housing Corporation; and
iii)requiring the donated land or buildings to remain an asset for the registered charity in perpetuity. This can be ensured by registering the occupant income requirement and other eligibility criteria as a covenant on title for the affordable housing project or unit.
b)The intent of this tax change is very specific and available only to charities for the purpose of developing affordable housing.
c)Administrative processes for this program could be similar to the existing Canadian Cultural Property Export Review Board in the case of gifts of certified cultural property and those of the Minister of the Environment for donations of ecologically sensitive land.
The Benefits:
1. Provide direct support to low income and homeless Canadians who will be impacted by the recession – targeting those in greatest need.
- An estimated 150,000-300,000 homeless Canadians are in need of affordable housing and supports.[9]
- More than 1.4 million Canadian households lived in Core Housing Need in 2001. One out of every ten Canadian households faced housing affordability issues.[10] 13.5% of urban Canadian households either lived in, or had insufficient income to access, acceptable housing in 2005. Urban low-income households continued to experience a high incidence (54.5%) of Core Housing Need in 2005.[11]
- A recession will have significant negative impacts on these at risk households. Lower income and fixed income Canadian households will be particularly vulnerable. Renters, female lone-parent families, seniors, immigrants and Aboriginal households will face higher risk. Investing immediately in affordable housing will ensure that our most vulnerable Canadians weather the impacts of these uncertain economic times.[12]
2. Create greater leverage than the direct investment.
- Every federal dollar investment could lever a minimum of two dollars from other sources including the private sector, provincial and territorial governments, and charitable contributions.The $2.5 billion investment would result in a $7.5 billion impact to the economy.
An Example of Leveraging:
Calgary’s Ten-Year Plan to End Homelessness provides a good example of how leveraging could happen. The Calgary plan calls for the development of 11,250 units of new affordable housing,supportive housing and treatment units, requiring approximately $622 million of publicfunding for building costs in today’s dollars over the 10-year period. This fundingwould leverage a further private sector and philanthropic investment of approximately$1.4 billion.
3. Reduce the cost of government services to the Canadian taxpayer.
- This economic stimulus is unique in its ability to ultimately save the Canadian taxpayer money.
- Estimates place the annual public cost of homelessness at $4.5 billion.[13]
- The chronic homeless consume almost 50% of the shelter bed capacity and services in the homeless system.
- Supportive housing is five times less expensive than institutional responses to homelessness (prison, detention, and psychiatric hospitals), and about half the cost of emergency shelters.[14]
In Calgary’s case, the $78 million federal investment[15] will create 1,560 new affordable housing units at $50,000 per door; about one third of these units will target the homeless.The average annual cost of system usage (hospitals, corrections, shelters, etc.) by a homeless person in Calgary is estimated to be $100,000.[16] The 520affordable housing units targeting this population will translate toan estimated 40% net savings[17]or $21 million per year. In other words, the entire federal investment of $78 million will be paid for within four years from the savings created by one third of the total units.
4. Positively impact every region of the country.
- This stimulus package can have an impact across the countryusing a per capita funding formula of $75 per person for total investment of $2.5 billon dollars.[18]
- The funding could be administered through existing mechanisms, such as the Homelessness Partnering Strategy, already in place and throughout Canadian communities.
5. Provide economic stimulus to recession prone industries.
- The contributions of housing to the economy are significant. The total value of residential construction investment for2007reached$88.7billion, an increase of8.5% compared with2006. Construction investment represents approximately 12% of annual GDP. [19]
- More than one million Canadians (one in 16 Canadian workers)earn a living in the construction industry and will benefit from affordable housing construction.[20]
- Federal investment in affordable housing will help maintain economic growth in this industry and offset losses in other sectors, particularly manufacturing.
- Affordable housing transactions across Canada will also generate significant ancillary economic activity. During the period between 2004 and 2006, it is estimated that a total of$15.3billion per year in ancillary spending (i.e., spending by purchasers on items other than theactual house and land) was generated by housing transactions.[21]
6. Investment in Canada and Canadians.
- Each new home built creates an estimated four to six person years of direct and indirect employment for Canadian workers. Housing development, maintenance and updating is one of the country’s main economic engines and provides jobs for years to come. [22]
- On average, households spend roughlyone-fifth of their income on shelter and relatedexpenses. By investing in affordable housing, renters’ income contributes to Canada’s public infrastructure.[23]
- Lumber production in Canadais highly dependent on demands in residential construction, thus investment in affordable housing across Canada will support jobs for Canadians in lumber production.[24]
- Available affordable housing will contribute significantly to local economies that would be able to attract and retain lower paid workers. This is particularly critical in high growth centres where labour shortages impact the well-being of these cities, which are widely acknowledged asthe engines of national economic growth, competitivenessand productivity. High or rising housing costsare a deterrent to labour mobility, reducing laboursupply and putting pressure on wage rates.[25]
7. Support for Affordable Housing from all Parties in the House of Commons.
- All federal political parties addressed the need for affordable housing during the 2008 election.
- The Conservative Party committed to renewing several affordable housing and homelessness programs.[26] The Liberal Party pledged to help provide 30,000 new social housing units and refurbish another 30,000 existing units.[27] The NDP advanced toward a 10-year goal to allocate "one percent" ($2 billion annually) of federal spending to affordable housing.[28] The Bloc´s platform reiterates its position that housing responsibilities and necessary financing be transferred to Québec and includes a discussion on the issue of homelessness.[29]
8. Reinforce federal investment with changes to the Income Tax Act to incent the charitable donation of land and buildings for use in affordable housing.
- Available donors are ready to step up to address the homelessness crisis with gifts of land and buildings, however, such donations are currently subject to capital gains tax.
- The Government has already taken steps to eliminate the capital gains tax for charitable donations of ecologically sensitive lands,[30] certified cultural property and publicly listed securities.
- A reduction in the capital gains tax rate in 2000 resulted in a 50% increase of average annual gifts to the Ecological Gifts Program.[31]This demonstrates that the favorable tax treatment of land donations has a positive impact on donor behavior. We strongly encourage the Government to extend this tax benefit to land and building donations for affordable housing to maximize leveraging federal and provincial funding.
Endnotes
1
[1] Laird, Gordon. 2007. “Shelter - Homelessness in a Growth Economy: Canada’s 21st Century Paradox,” prepared for the Sheldon Chumir Foundation for Ethics in Leadership. Online at:
[2] Pomeroy, Steve. 2005. “The Cost of Homelessness: Analysis of Alternate Responses in Four Canadian Cities,” prepared for the National Secretariat on Homelessness. Online at:
[3] CMHC. 2006 “Households in Core Housing Need, Canada, Provinces, Territories and Metropolitan Areas, 1991-2001”. Online at:
[4] Statistics Canada. 2008. “Residential Construction Investment.” Online at:
[5] Construction Sector Council. n.d. “A Snapshot of the Construction Industry.” Online at:
[6] $2.5 billion @ $50,000/door = 50,000 units. $2.5 billion @ $30,000/door= 83,000 units. Different regions will have different opportunities and limits based on the local housing market and affordable housing funds available.
[7] According to CMHC, for housing to be considered “affordable housing”, renter households should spend no more than 30% of their gross household income on shelter costs (rents and utilities), and owners should spend no more than 32% (on mortgage principle and interest, property taxes, utilities, and condominium fees).
CMHC. 2008. “Canadian Housing Observer 2008”. Online at:
[8]CMHC considers a household to be in Core Housing Need if members live in housing that is below one or more of the adequacy, suitability, or affordability standards, and have incomes that are too low to allow them to rent alternative local market dwellings that meet acceptable standards for less than 30% of their before-tax income (CMHC, 2008).
[9] Laird, 2007.
[10] CMHC. 2006 “Households in Core Housing Need, Canada, Provinces, Territories and Metropolitan Areas, 1991-2001”. Online at:
[11] CMHC, 2008.
[12] CMHC, 2008.
[13] Laird, 2007.
[14] Pomeroy, 2005.
[15]Calgary’s population in July 2008 was 1,042,892 according to the City of Calgary 2008 Civic Census, online at
[16] RSM Richter & Associates Inc. 2008. “Report on the Cost of Homelessness in the City of Calgary,” prepared for the Calgary Homeless Foundation.
[17]A range of cost savings have been reported by a myriad of studies, but the pattern is clear: homelessness is expensive, and substantial broad cost savings of about 40% can be achieved by investing in affordable supportive housing according to Pomeroy 2005. Comprehensive reviews of the ranges of cost implications of addressing homelessness are available from the following:
- Berry et al. 2003. “Counting the Cost of Homelessness: A Systematic Review of Cost Effectiveness and Cost Benefit Studies of Homelessness,” prepared for the Commonwealth National Homelessness Strategy.
- Eberle, M., D. Kraus, et al. 2001. “The relationship between homelessness and the health, social services and criminal justice systems : a review of the literature,” prepared for the BC Ministry of Community, Aboriginal and Women's Services.
[18]Canada’s population was 33,311,400 in July 2008 according to Statistics Canada.
Statistics Canada. 2008. “Canada’s Population Estimates July 2008”. Online at:
[19] Statistics Canada. 2008. “Residential Construction Investment.” Online at:
[20] Construction Sector Council. n.d. “A Snapshot of the Construction Industry.” Online at:
[21]Altus Clayton. 2007. “Economic Impact of MLS Home Sales 2005-2006,” prepared for the Canadian Real Estate Foundation.
[22] CHRA. 2008. “Ministers’ Meeting.” Online at:
[23] Federation of Canadian Municipalities. 2008. “Sustaining the Momentum: Recommendations for a National
Action Plan on Housing and Homelessness”.
[24] Statistics Canada. 2002. “The Lumber Industry: Crucial to Canada’s Prosperity”. Online at:
[25] Federation of Canadian Municipalities, 2008.
[26] Conservative Party of Canada. 2008. “The True North Strong and Free: Stephen Harper’s Plan for Canadians”
[27] Liberal Party of Canada. 2008. “Richer, Fairer, Greener: An Action Plan for the 21st Century”. Online at:
[28] New Democratic Party of Canada. “2008 Election Platform”. Online at:
[29] Bloc Quebecois. 2008. “Present pour le Quebec”. Online at:
[30] Environment Canada, Canadian Wildlife Service (n.d.) “The Ecological Gifts Program”. Online at: