The Housing in Canada FAQ - part 1

Curious about what's really going on with Canada's housing system?  Here's your answer... actually, many of them.  

At its recent Housing Future Summit, CUI gathered the leading voices in the housing continuum to answer some FAQs about current challenges and opportunities, and the solutions in development across the country. 

Host Mary Rowe is your guide and quiz mistress. 

Transcript

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Speaker 2 0:05

Hi, I'm Mary Rowe of the Canadian Urban Institute, or C UI, where we're committed to exploring and explaining what's working, what's not, and what's next in cities across this country. Welcome to a special series of City Talk programs about housing in Canada. This past June, we gathered many of the leading voices in the housing ecosystem. And it is an ecosystem, or a continuum, if you prefer, to discuss the opportunities and challenges in developing what seems to be a staggering volume and variety of housing options that our growing communities need. All orders of government were represented, including Gregor Robertson, the Federal Minister of Housing, Infrastructure and Communities, as were some of the country's largest real estate developers, financial organizations, and associations focused on building more affordable and supportive housing models. A lot of these folks know each other, but many don't. And they don't often get the chance to catch up on all the things they're involved in to address the urgent need for housing. Or to put it more succinctly, where the money is and what the market is telling us about the future of this ecosystem. Of course, having all these decision makers and experts in one place also creates an ideal opportunity to ask the types of questions that can help us all make informed decisions about our own housing needs and what our communities need now and in the future. So we're calling this podcast series, the Housing in Canada FAQ, with answers to frequently asked questions that affect communities of all sizes to coast and coast. We'll start with the one that's top of mind for most people these days.

Speaker 7 1:47

Has anybody figured out how to lower the cost of housing?

Speaker 2 1:51

Affordability remains the number one issue in housing, and you'll hear many experts say that we don't really have a housing supply crisis as much as we have an affordability one. Blake Hutcheson is the president and CEO of OMERS, one of Canada's Maple 8 pension funds, with a corporate mission to build tomorrow together. Here's his answer to that question, describing a CUI-supported housing working group that he has been co-chairing for the last several months.

Speaker 3 2:48

And if you can get land from cities, provinces, the nation for free as a starting point, you can wipe out 20 or 30 percent of a pro forma cost. Then you get into hard costs. What can you do smarter, faster, cheaper? Within that bucket, there's all kinds of things that you can do to get housing stock kick-started. Soft costs, the big one is fees and dues and levies. How can you get them to be paid post-construction as opposed to pre-construction? Because the cost of vacancy eats up a pro forma. It's in the cost of money, whether it was CMHC or otherwise. And it's actually a really good way to look at it because if you can find many points of light, you can get to a place that can in fact be affordable, because there isn't one single solution. So that was sort of our approach to the government, and that's what we shared with them. And I think it was very instructive.

Speaker 2 3:39

Blake just touched on another topic that is mission critical to growing the ecosystem.

Speaker 3 3:44

How much public-private cooperation is there at this stage? It's, I would say, an all-hands-on-deck moment. And so this is one of those times where I've seen, at all three levels of government actually, uh a willingness to just roll up our sleeves and try to help who's ever there. And and I think it's the right attitude in a time like today. I think, like you, this we are in the greatest country on the planet. There's no question in my mind. And let's recognize that notwithstanding are there good things to do, it's an incredible place to make a living and make a difference in our country.

Speaker 2 4:19

Hard to argue with that sentiment. One of the key reasons to create alignment across the housing continuum is to clear existing impediments and roadblocks. Here's a question aimed directly at Blake's corner of the ecosystem.

Speaker 5 4:32

Canadian pension plans are investing in affordable housing projects in other countries, but not here at home. Why not?

Speaker 3 4:40

Around the Western world, there are places where this is really working. And I'll be very clear, Oxford, in fact, all the Canadian pension plans can't be in the housing business because of the legislation. We can match long-term assets with long-term liabilities, but we can't go and buy and build and flip. We can buy and build or renovate or acquire and hold long-term, which is why you'll see pension plans in the leasing business, but not necessarily the housing business. And so as much as you want to be part of it as a Canadian pension plan, there's a prohibition against actually building and flipping things. So this is not about us. It can be, I think we can help on the rental front, but not necessarily on the building itself front. But we have seen where our commercial projects unlock low-income housing in other places in the world. And by the way, we want to do a lot more in this country. We OMER's in Oxford.

Speaker 7 5:38

Given the many efforts to solve our current housing crisis, what kind of outcomes matter most?

Speaker 2 5:43

Finding creative and sustainable solutions to Canada's housing crisis would be dead easy if everybody agreed on the same approach and the types of outcomes we need. All hands-on-deck collaboration is clearly essential, but what matters most is often a matter of perspective. Carolyn Weitzmann, a senior housing researcher and professor at the University of Toronto School of Cities, offers hers.

Speaker 9 6:06

There's three outcomes I'm going to argue that matters. One of them is the number of people without homes. A woman without a home has a life expectancy of 36 years, half that of a woman with a home. The second stat that really matters is low-income people who are renters. And that's because their next step is homelessness. In France, 15% of low-income renters are in unaffordable housing. In Canada, 83%. And the third thing that we focus a lot on is affordability. Well, I was a member of QP79 when I worked for the city of Toronto. The average income of a QP79 member is $60,000 to $75,000. That's a moderate income. That means people are looking either for homes using the traditional affordability metric of a house cost being three times the median house price divided by median wage. That would be a house price of about $200,000. So in Toronto, house prices are at least three, possibly four times what a median income household can afford. So by those outcomes, we're not doing well. And by those outcomes, other countries that have similar wealth are doing well. What matters is we're doing it badly and we need to do better. If we start sort of with a pro forma, then what we're going to end up with is the system that we have. If we start off with who needs what housing where and at what cost, and build or rebuild the systems that we need in order to have affordable housing, we're going to have a different housing system, I think.

Speaker 2 8:07

Like any complex ecosystem, housing has its own terminology and vernacular. Here's an FAQ about one of the most popular these days.

Speaker 4 9:12

So there's there's been a clear model that's emerged really since 2017 that's very effective. The other part of the that big fat middle that we focus on is just regular run-of-the-mill uh market rental housing. Just as an example, if you make $100,000 a year, you can afford, and you want to say 30% of your income on rent, you can pay about $2,500 a month. That's more or less what the market rent is in Toronto today, but it actually costs more to build than you can get with an attractive yield on that rent. So the other thing we need to focus on in this point of time is how do we lower the cost to build market housing as well. Not subsidized with by government or anything like that. That's a different model. But how do we say, okay, what are the what are the inputs that we can control? Let's recognize the ones that we cannot control. And I think that market housing, as we know, is under tremendous pressure. Uh no condos are getting built. PBR remains a purpose-built rental remains challenged in the major markets. So uh we need to look at what we can do today to make sure that we don't hit a uh supply wall a couple years out.

Speaker 2 10:16

And given his company's involvement in a wide variety of projects across Canada, Jamie's ideally suited to tackle this next big question.

Speaker 8 10:23

Can you describe the state of market housing in Canada right now?

Speaker 4 10:27

Sure. Let's start with some of the smaller markets because it's it's a little bit clearer there. So in Edmonton, Saskatoon, Regina, and Calgary, uh, we build quite a bit. We build apartments there. It works great. We can build to an attractive yield where it justifies our capital being invested into new apartments. We can provide housing at an affordable level, which is you know below the 30% of income. In fact, the only limitation the limitation that we have there is not how do you put money into the development to make it work, but when we want to start the next phase of market housing, the governments there don't have the capital to build the roads and the infrastructure that they need to provide so we can do our job. Right. When you work at when you look at a city like Toronto, it's that's not all at all the issue. The issue in Toronto is uh we used to finance by building condos, which really means let's take deposits from people who are committing to purchase the asset in the future and let's use that to help fund the project. Right. But in order to do that, you gotta believe that the building's gonna be worth more five years out from now than it is today. That's why people pay a premium. That's not working because as people are taking delivery of their condos today, they're worth much less than what they paid for. And we're having defaults and a whole bunch of challenges in that market. That's an issue for today. If we're looking about the future, what it means is nobody's gonna build the next condo. And we see it because in the first quarter of 2026, there was not a single new condo launched in the GTA. Not one. That has been probably 80% of the high-rise supply that's been delivered in Toronto over the past 15 years or so. So, what does that mean? It means very new homes built five years from now. They're just not gonna get delivered. Purpose-built rental has been increasing as uh a component of the housing equation, but at a much smaller amount than than condo, and it's still under pressure because rents have come down. So uh it's very hard to get the new stuff built. We're gonna start returning to immigration growth, and what that means is three, four years from now, we're gonna have lots of people wanting homes and very few homes to provide to those people.

Speaker 2 12:23

So, as always, it's complicated, and it will remain so for a while. As many of you likely know, there's a lot of federal and other investment working to build housing projects across the country. Billions with a capital B. However, many governments, investors, and corporations have also developed policies and pledged piles of cash to address that other pesky crisis, climate change, which makes this a very fair question.

Speaker 12:50

With the push to build new housing, does building green still matter?

Speaker 2 12:54

For her turf in Waterloo, Ontario, Mayor Dorothy McCabe certainly believes it does.

Speaker 8 12:59

You know, the environment and the economy are not in competition with each other. We know that there's lots of green tech jobs. We know that the building industry, with all due respect to everybody who's in it, is one of sort of the last to really innovate and change. We know that there's some really great opportunities in there, and there's some really great local jobs that can be created, um, of course, through the building industry, but also built by building with the green economy in mind. And so part of what I'm on a national climate caucus, it's called Elbows Up. Um, but part of what we're calling for through Build Canada is for clear performance standards with uh with the building that's going to be done, particularly for those long-term rental and cooperative housing and supportive housing, because those we know that the operating costs are a huge part of operating housing, but investing wisely at the from the start with energy strategies, heat pumps, etc., that can really drive down some of those operating costs for the tenants, whether you own or whether you're renting. So the environment is a really key piece that uh that that I think needs to be built more into this conversation as well.

Speaker 2 14:15

I'm Mary Rowan, you're listening to our first housing FAQ episode of City Talk, presented by the Canadian Urban Institute. You don't necessarily need to ask all the right questions or have all the right answers to understand that housing in Canada and everywhere else is a complex business. And when it comes to business of any kind, a question like this one, though, is a pretty safe bet.

Speaker 10 14:37

Despite all the government and private sector investment being talked about, does housing in Canada still have a money problem?

Speaker 2 14:44

First person asked to respond to that query is Derek Ballantyne, managing partner and CEO of New Market Funds and BOAN's Social Capital.

Speaker 6 14:53

Building, buying, renovating is always a money problem. It's always can you afford to do it given the revenues you're gonna get, what your target market is, and so on. And and you know, there's no there's no real magic in pro forma. They all look the same whether you're building non-market or market housing. You know, you have a certain level of revenue, you can afford a certain level of debt, you can find the instruments that stretch and expand that and increase your debt capacity, and then you have an equity gap, and you have to figure out how do you fill the equity gap. And we've done it in different ways, in different structures, in a programmatic way for a long time, you know. But we're now sort of all confronted, whether it's market or non-market, with that same challenge because costs have risen significantly and incomes from you know the productive income of assets has not been rising in equal measure. So we've got a really stuck market, which is a money problem at its core, right? And I think you know the the policy choices we make are gonna be important around how we start solving and changing that equation in different segments of the market to make sure they all move. And I I honestly don't think we can afford to singularly focus on one part of the market at the expense of all others. We've got to figure out what the policy mix is across the board that actually creates those vibrant communities that we're trying to figure, you know, achieve and creates livable places and creates housing that meets a range of demand. So, yeah, it is a money problem, and yes, it is a set of policy choices that have to be made. And I frankly don't really think it's a jurisdictional or constitutional issue. It's what governments writ large decide is in our interest and how we start aligning those those expenditures.

Speaker 2 16:41

However, whether there's a lack of money in the ecosystem does depend on whom you ask. Here's Carolyn Weitzman's response.

Speaker 9 16:49

What we need to do is enable the holes in the ground, the crane in the sky, the renovation work that needs to happen to make us ready for the 21st century at an affordable price. And definitely public housing is part of that, co-op housing is part of that, nonprofit housing is part of that. That's called counter-cyclical investment.

Speaker 2 17:13

Right.

Speaker 9 17:14

And it works.

Speaker 2 17:15

Do we have any jurisdictions where that is where they have counter-cyclical down around the world? You're a scholar. Absolutely.

Speaker 9 17:20

I mean, when you look at um the history of Sweden or the history of Austria, or the history of Canada, in the 1970s, 14% of our completions across the 70s and the 1980s were non-market housing. And what is it now? It's about two and a half percent.

Speaker 2 17:40

Magic drops.

Speaker 9 17:42

I mean, it was zero for a whole generation, which is part of the problem that we have. So, how can we remedy that huge gap, which is an enabler of homelessness and low-income housing need? And the answer, I believe, is we've got nine trillions in banks, about an equivalent amount, seven trillion dollars in investments and pension funds. The question is, and this is a key question, how can we make that capital more patient? How can we have revolving loan funds that last for, say, 50 years at a relatively low prime rate? Let's say it's, you know, uh renewed every five years, kinds of things, because that's what works in Austria and in Denmark and in France and in other places that have been building the kind of housing that's most needed. And it creates jobs and it creates homes that people actually can live in and have families in.

Speaker 2 18:46

Is there a recent example of a successful collaboration in new housing development? Well, yes, many more are emerging, including one developed in Waterloo by Mayor Dorothy McCabe and her council. A few years ago, they announced their own affordable housing strategy and pledged to donate city-owned land to help enable new projects. She'll tell you the rest.

Speaker 8 19:06

The private sector locally, a couple of the developers, because they see all the problems that you know that have been identified with the financing and the challenges, etc. And they came to local mayors and said, we have this idea, they called it Build Now Waterloo Region, where the private sector, because they know they're coming, they were coming into a bit of a downturn with condos particularly, and they said, Look, we know we need more affordable housing. We need about 10,000 units across Waterloo Region. We're a community of about 700,000. Um, and you keep asking us to put affordable housing into our condos or rentals, etc. We don't really know how to build that. We certainly don't know how to operate it. We're not social housing providers. So they um formed a partnership with some of our local nonprofits who are um you know co-op operators and you know supportive housing, like this is what they do. And they came to the city and said, and with Habitat for Humanity, that's a big key piece of it, and said, can we work together on this? And that's about the time that the Housing Accelerator Fund came along, which you know, because to for a municipality to give away land is very expensive.

Speaker 2 20:11

Like was there any resistance?

Speaker 8 20:13

Oh well, yeah, 25 acres of land is worth a lot of money, and municipalities, you know, we're we're very sh we we need a new funding formula for municipalities for sure. So the community said, like and our councils and staff said, let's do this. So we've transferred the land in 20 end of 2024, you know, all the site planning, etc. Um, so the first co-op housing is going in the ground uh on to on Wednesday, and then the I the idea is that Habitat for Humanity project manages this. They're gonna build um attainable housing as well, and that will get people of that certain you know six fifty, eighty thousand dollars income level into the market to be able to get some equity. We're gonna we're building these like one, two, three, four, five bedroom homes. So and we're building them in consultation with the nonprofits who tell us what they need. It's a perfect model, really.

Speaker 2 21:04

I mean, can we can we scale it, Jamie? I mean, you're doing this too.

Speaker 8 21:07

But I mean Habitat believes they can.

Speaker 4 21:09

The conclusion from this panel is that we have to choose. It doesn't have to be non-market housing, uh provided by government or private sector housing. It it can and needs to be both. Um, can we scale the model? Absolutely. And a dream we have. Uh we've put a shovel in the ground on actually officially now a little over 3,000 units in downtown Toronto in the past six months. Rental. All rental, of which uh two uh twenty percent of those units are gonna be affordable.

Speaker 6 21:38

Right.

Speaker 4 21:39

Uh so we are making progress on those, and it does take a lot of different uh incentives and subsidies, but it is a pretty efficient model.

Speaker 9 21:47

I just have to jump in. Affordable to whom? Because if you're using apartment construction loan, that's affordable to middle income people, which means that 80% is unaffordable. What's the better term? It's optimal. Well, the better term is affordable, but it the actual definition of affordable, which is thirty percent of income for, for instance, renters, which would take it lower to low moderate.

Speaker 2 22:14

I know that I do know there's this big bun fight about affordable that def and I know you've asked for this. Can we get a proper definition of what affordable is? Uh and I think Jamie's definition is slightly different than that.

Speaker 4 22:23

What's the definition of middle class? Like I think that uh a lot of these terms are intentionally vague. Right. Perfectly fine. Probably political rationale for it. I don't blame the politicians for it. But when we talk about affordable, we mean uh because you're right, it it's a whole bunch of definitions. But what I did start start by saying was like if the rent can't afford uh cannot support the operating cost of the building, we cannot we just cannot do it. Private sector, no good. Right. For the big fat middle, that's where we can contribute a lot. Is it affordable to everybody? Of course not. But there's some people who need who can afford almost no monthly rent payments, and there's some people who just need a little bit of help. And that's what that's where we can be quite helpful. So we have a lot of units where if you make $60,000 a year and you can put 30% of your income to housing, that's $18,000, and it's $1,500 a month, and we have units in our buildings owned by the private sector that work quite well for that, and we can contribute a lot more.

Speaker 2 23:18

Change, both good and bad, is coming at us all more rapidly in 2026, with a lot of it driven by brand new ideas and technologies. So it follows that many of you are asking this question.

Speaker 1 23:29

Has the Canadian housing sector embraced innovative technologies and construction methods?

Speaker 2 23:35

Another relatively contentious question, depending on whom you ask. Here's Derek Valentine of New Market Funds.

Speaker 6 23:41

It is true in as an industrial sector, housing in Canada has not really gained much efficiency over the last 50 years. Relative to any other industrial sector, it's not seen tremendous gains. And there is, you know, I think we know that there are technologies that can be applied, we know there are methodologies that can be used, but we are a very small market, and it's really hard to capitalize that kind of investment on the base on a very low volume uh set of productions. The federal government actually could, in a more constructive way than it has so far, change that equation, but it hasn't chosen to do it yet. They they, you know, it's been a very timid approach in terms of how to incent market change. Um and until that happens, I mean it it's unfair to put the burden of risk on those who are developing housing to take all of the capital risk on on making that technology change. So the potential exists, and we we know there are other countries that have made that turn and changed dramatically their industrial base, but we don't yet have the conditions here, I think, that can do that.

Speaker 2 24:48

However, innovation is here somewhere, if not everywhere, according to Karen the Whitesman.

Speaker 9 24:54

There are examples. I mean, Sweden is a great example. They built a million homes in a country of six and a half million people from 65 to 74. They did it, and they did it on the back of very simplified zoning, um, very uh consistent building code and replicable design. And we're seeing that now in Canada. We're seeing that uh, for instance, with the Maison Unitaire, yeah, sorry, in terms of modular design, um, which is like uh in 11 small towns in Quebec, uh 100 um home seniors buildings that are basically to the same design, but it's going to take a lot more zoning simplification and a lot more building code simplification, I would argue across Canada, because we are a relatively small uh market, and until then, it is a huge risk to build a factory.

Speaker 2 25:55

So many questions and plenty of good answers. We hope you've heard some helpful, useful things in the past 30 minutes. If your area of concern hasn't been addressed yet, join us for the next Citytalk episode devoted to Housing in Canada, the FAQ. This episode of Citytalk was produced by Andre Lariviere for Purple Pro Solutions. I'm Mary Rowe. Thanks for listening.