Profit and affordable housing do not mix. Period
It’s time for some unconventional thinking about the affordable housing crisis.
We could start by admitting that housing and profit don’t mix.
We’ve long believed this to be the case in medicine, which is why most major economies have universal health care systems dominated by nonprofit providers.
With the near absence of non-profit housing providers in Canada, it has become increasingly difficult to find reasonably priced starter homes and housing for middle-class and low-income families.
Instead, with its plethora of monster homes and luxury condo towers, our city is increasingly looking like a gated community. Like Nairobi. Or Manila.
A remedy that demands that we remove as much of the profit-seeking from housing as possible.
“The crux of the housing problem is that it is both a fundamental human right and a commodity to be profited from,” recently wrote Brian Doucet, Canada in Urban Studies at the University of Waterloo.
Most of the time, for-profit developers build high-priced housing. They do it because that’s where the big profit margins are.
That is why the instrument to make abundant affordable housing a reality is government and its non-profit housing partners. The free market cannot do it, will not do it, and it must be done.
Two false hopes cloud the vision of today’s housing reformers.
They believe that Canada is suffering from a housing shortage and that simply building more homes will solve the affordability problem.
Ottawa and the Conservatives and NDP in their Ontario election campaigns promised to build more housing, presumably on the same free market principles that produced very little affordable housing. (The Ontario Liberal housing platform is coming soon.)
They offer grants and indefinite subsidies to builders and buyers, who will build and try to buy the homes dictated by the for-profit market.
It turns out that there is no shortage of housing in Canada. Home builders keep pace with the increase in population.
Talking about this phantom shortage diverts attention from the real problem, the shortage of affordable lodging. Our starting point should be the type of homes needed and by whom, not just a count of housing starts.
The other false hope is “upzoning,” which abolishes zoning rules that have long required a demolished home to be replaced with a single-family home, in order to preserve neighborhood character.
The rezoning process is underway in Toronto and many other jurisdictions.
It encourages the building of once-excluded housing types, including duplexes, triplexes, townhouses, laneways and low-rise apartment buildings in established neighborhoods.
Superior zoning is a quick fix intended to increase density and bring justice to racialized and low-income people most affected by previous exclusionary zoning.
But in practice, upzoning looks like our old enemy of gentrification.
With the free market still deciding what gets built, often a demolished house is replaced by a low-rise apartment building with units renting for between $2,800 and $3,600 each.
Either the “knock-down” purchased by a promoter for $800,000 is replaced by a duplex, each half of which costs between $1.2 and $1.4 million.
This drives up the assessments and rents of all nearby housing, making the neighborhood even less affordable than it was before zoning.
As we continue to focus on false hope, housing prices and rents continue to soar.
In April, the benchmark price for a single-detached home in Toronto and Vancouver was $1.7 million and $2.1 million, respectively.
In its latest forecast, the Canada Mortgage and Housing Corporation (CMHC) expects current high price levels to continue into 2024.
Affordable housing will only become abundant when governments do, a mission they embraced until the early 1990s.
They built affordable housing for returning veterans after World War II and then to accommodate waves of immigrants to the GTA in the second half of the 20th century.
Canada has a long tradition of governments at all levels providing affordable housing. Non-profit, they can, as they once did, provide decent housing at reasonable prices and rents.
In the 1970s, the federal government also invested heavily in non-profit co-op housing. Co-ops are permanent affordable housing that cannot fall into the hands of speculators. Today, about 125,000 Ontarians live in co-op housing.
The famed David Crombie mixed-use co-op complex on Toronto’s waterfront can be replicated on a smaller scale, adding to existing co-ops discreetly tucked away in neighborhoods across the city.
Ottawa has committed $1.5 billion to co-op housing. But his separate $4 billion plan to increase the supply of affordable housing is expected to be guided by the Crombie project.
Two-thirds of this complex was built by non-profit developers. Left to their own devices, for-profit developers revert to the mean, which is profit maximization.
The pursuit of profit has its place in our mixed economy. But it let us down in providing affordable housing. Housing will not be a human right until we accompany this noble feeling with an abundance of affordable housing.