Canadian Government Makes $1.5 Billion Investment In Affordable Housing

As much as Americans are struggling with housing affordability, it may come as a surprise to find out that Canada is struggling with the same issue. Canadians are grappling with a lack of affordability and high interest rates, which explains why Canada's government recently announced plans to allocate CA$1.5 billion ($1.1 million) to boost the nation's affordable housing stock.

The $1.5 billion allocation will be part of the Canada Rental Protection Fund, which will provide $1 billion in loans and another $470 million in direct government grants to nonprofits and other organizations. The money will be used to purchase or develop affordable rental housing. As is the case in the United States, affordable rentals in Canada's major population centers are in short supply. 

The same dynamics that make affordable housing hard to build in America are manifesting themselves in Canada. The cost of acquiring land plus building and debt service have left many Canadian developers in a place where the higher-end/luxury apartment sector is the only place they can make a profit. This imbalance of new luxury housing creates beautiful skylines but also freezes out low- to moderate-income earners and young people.

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Without access to lucrative career paths in places like Toronto, it's unlikely that young Canadians will reach their full earning potential. That would leave many of them in a position where they could never afford to purchase a home. The ramifications of that could be a cycle where future generations fall further behind their predecessors. That would also diminish the tax base that Canada's federal government and state-funded healthcare system depend on.

It may also be more than a coincidence that Trudeau needs to shore up support among Canada's young voting base. Politicians have sought to expand their voter base by adding jobs or catering to essential voting blocs for as long as elective democracies and republics have existed.

Even if there may be some degree of self-service to Trudeau's latest gambit, it's a safe bet that anyone who rents an affordable apartment will mind. The beneficiaries of Canada's new affordable housing fund are also probably going to remember Trudeau when the next election comes around. Even within that framework, however, this represents a different approach to affordable housing than the one being taken in America.

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Traditional public housing in the United States is privately owned and rented to tenants who rely on a combination of tax credits and subsidized rent payments. However, with privately owned real estate, landlords can eventually opt out of the affordable housing programs or sell the properties to new owners who want to redevelop the land. In many cases, the redeveloped community is luxury housing, which depletes the area's affordable housing stock.

By contrast, Canada's Rental Housing Protection fund would create permanent affordable housing stock that future generations of Canadian residents can access. So, even if there is a real estate boom in a city like Toronto, housing will be available to Canadians with limited incomes.  

There doesn't appear to be much political appetite to adopt the Canadian approach at the federal level in the U.S., but several American cities, including Miami and Atlanta, have broken ground on new multifamily housing developments that will be municipally owned and operated. If housing affordability persists at crisis levels in America, it's a matter of time before a politician running for national office makes a similar proposal.

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