Obstacles to Affordable Housing in Ontario

About Us - Burlington 2016

The demand for affordable housing across Canada continues to grow. The country’s existing stock of affordable housing units are old and in need of maintenance, and developers aren’t building enough units to meet or keep up with growing demand. A 2017 survey shows 90% of Canadians find it important in creating a solution to the lack of affordable housing. In Toronto, close to 95,000 people are on the waitlist for affordable housing units. In 2015 and 2016, Toronto reported 78 deaths of people using shelters. In 2016 alone the median stay in a Toronto shelter before death was 98.5 days with a range between 1 and 5,475 days. Support for affordable housing is strong in Canada but the problem persists.

Not in My Backyard (NIMBY) describes a situation where current residents oppose any new developments or change in occupancy of an existing building for being inappropriate for their neighbourhood. NIMBY opposition to affordable housing development is based on perceived characteristics of people who will occupy the affordable housing units. This perception is usually based on a single anecdote but generalized to everyone. Even with the significant benefits of affordable housing to all Canadians, obstacles remain firmly in place. Government obstacles, private investment obstacles, and NIMBY obstacles all conspire to perpetuate the housing crisis.

Government Obstacles

There are numerous government regulatory and planning barriers to affordable housing development. Taking Halifax as an example, developers highlight specific challenges including zoning bylaws, development fees, lack of coordination on the part of the government, and dealing with staff at the municipal level as obstacles to affordable housing.

One major challenge faced by developers arises when a city lacks an updated inventory of housing stock. A robust inventory system enables officials to monitor physical conditions and replacement value of homes. Access to such a system would allow city planners and developers to understand better how the housing sectors are interacting. An updated system gives government officials the information needed to better assess how housing policies are working.

These regulatory and planning barriers result in lengthy timelines and complicated processes for approval of the rental development. The result increases in both risk and cost to developers investing in affordable units cost prohibitive.

Tax Barriers

The same report from December 2017 points to unfavourable tax policies as a barrier to affordable housing development. When tax policies add to the cost of development, the focus of builders shifts to more profitable construction projects. Affordable housing development has slimmer profit margins than condominium development, which makes it less appealing for those funding and profiting the projects.

In the mid-1980s, the federal government discontinued the last tax incentives for development of rental housing. The result has led to a decline in production of rental properties in Canada. When rental property tax is high, operating costs increase making them less financially viable. By lowering property taxes on the rental building, it would incentivize owners to keep those buildings as rentals.

Financial Barriers

The ultimate barrier to investment in affordable housing according to a report released by UBC’s Sauder School of Business is the risk. By definition, affordable housing is rented or sold at below-market value. In Toronto, the break-even-point on a rental unit is $2,200/month (to match the return on investment if the unit was sold at market value). Unfortunately, affordability in Toronto is closer to $930/month.

For the developers, this is not merely an issue of the profits. The goals of private developers; the price of land, development fees, community appeal, construction costs, and limited supply all contribute to the underlying cost of development. Without government investment or incentives, developers cannot bear the cost of required to build affordable housing units.

Private Investor Obstacles

A report released by Cities Centre, University of Toronto September 2012 points to the five barriers to private investment. First, uncertainty due to lack of long-term government commitments to ensure every Canadian has an affordable, decent home. Second, difficulty obtaining favourable financing terms. Lenders require a significant investment on the part of the builder. Third, as previously stated, government regulations and policies increase costs and decrease the viability of the project. Fourth, the predevelopment process is difficult, time-consuming and expensive.

The high cost of CMHC Mortgage Insurance, lack of consistency among all levels of government and the length of time required for zoning approvals (which can take more than a year and cost more than $100,00), building (and other) permits make development more of a hassle than its worth. Factor in the risk and lack of profitability in affordable housing, there is no reason for a private investor to fund these projects.

Community Obstacles

In September 2011, Johnathan T.M. Reckford, CEO of Habitat for Humanity International, delivered a lecture at Harvard University. Mr. Reckford discussed three myths surrounding affordable housing.

Myth #1  

Housing is important, but when you consider other vital social issues, it isn’t at the top of the list.

“The reality is that health and education suffer and job opportunities diminish if affordable housing is not available. The lack of adequate housing directly undermines society’s massive investment of tens of billions of dollars in health and education.”~ Jonathan T.M. Reckford

A study conducted by the Boston Consulting Group for Habitat for Humanity shows the remarkable benefits of affordable housing:

  • Increased employment opportunity
  • 60% reduction in use of food banks by Habitat partner families
  • Improved health behaviours (smoking cessation, increased physical activates
  • Greater community and social engagement (voting and community volunteering)
  • Better educational outcomes (lower dropout rates)

Myth #2

Affordable housing is a problem for someone else.

“…housing is as important to community health as it is to individual health. Investing in affordable housing attracts new businesses, creates jobs and, many times makes communities safer. When these investments are absent, communities struggle and the ripple effect is devastating. Eventually, those ripples affect everyone.”~ Jonathan T.M. Reckford

Myth #3

Homeownership isn’t for low-income people.

A few years ago, homeownership was widely—and unwisely—encouraged. Now many argue that purchasing a home is a bad idea for low- and even middle-income families. Rental is being touted as the better option. The reality is that we need the full spectrum of housing products and that people of many income levels can be successful homeowners.”  ~ Jonathan T.M. Reckford


Whether you look at affordable housing as a fundamental human right, a benefit to Canadians, or an economic investment in your community, the crisis remains. Thankfully there are solutions to the affordable housing crisis in Canada, but it will require a focused effort. The question remains, how do we get all levels of government, private investors, and community objectors working together to solve the problem?

By: David Wright