The Hub’s second annual Hunter Prize for Public Policy, generously supported by the Hunter Family Foundation, focused on solving Canada’s housing affordability crisis. A diverse group of ten finalists have been chosen from nearly 300 entries, with the finalists and winners chosen by an esteemed panel of judges, including Amanda Lang, Ben Rabidoux, and Mike Moffatt. The Hub is pleased to run essays from each finalist this week that lay out their plans to help solve this persistent policy problem.
Canada is experiencing a significant housing affordability crisis, characterized by rapidly increasing home prices and a limited housing supply. Between 2016 and 2022, the average home price nationally surged by nearly 40 percent. This housing shortage is exacerbated by local land use and zoning policies that have restricted housing construction and growth.
As a result, Canada now has the fewest homes per capita among G7 countries, indicating a pressing need for innovative solutions to increase the housing stock and make housing more affordable. Remote work has led to decreased demand for office space, resulting in higher vacancy rates and lower commercial real estate prices in urban centers. While more is needed to be done at every level of government to address the ongoing housing crisis, the structural decline in commercial real estate may present an opportunity to alleviate some pressures.
The Commercial-to-Residential Incentive Blueprint (CRIB) is a multifaceted, inter-jurisdictional policy proposal to address the root causes of the housing shortage in Canada through policies that aim to increase housing supply while tampering demand. The approach seeks not only to increase the supply of housing but also foundationally alter how housing development is perceived and undertaken across the country. The CRIB would work in tandem with existing housing policy mechanisms, expanding the eligibility of certain programs while leveraging federal assets to attract private investment. Local reforms can be adopted by municipalities on a case-by-case basis; the more aspects of the plan they adopt the larger pool of federal funding they would be eligible for.
To spur private investment, the CRIB would expand the eligibility for funding mechanisms; acknowledging redeveloping commercial properties is expensive and typically not financially viable. The CRIB would also provide tax incentives that seek to ease the financial burden of residential development. Finally, utilizing federal properties identified by Public Services and Procurement Canada (PSPC) for lease, tapping into the vast federal real estate portfolio as a means of expanding housing. Noticeably, the CRIB focuses on supply-side incentives as a means to increase affordable housing. There are no aspects of the CRIB that seek to subsidise or increase demand. This is deliberate given policies that increase demand would only see an increase in housing prices and exacerbation of the current crisis.
Commercial-to-residential incentive blueprint
Two significant burdens that constrict housing supply are development charges and property taxes. These are the main mechanisms by which municipalities fund services such as sewers, roads, and schools. Both development charges and property taxes negatively impact housing supply in their own way. For municipalities that freeze or lower development charges, funding would be made available under the CRIB to mitigate decreased taxation revenue. Development charges are a key factor driving up the cost of housing, and in some areas exceed $190,000 for a single-family home. Property taxes, on the other hand, create an incentive structure for commercial landowners that penalizes the redevelopment of underutilized land into housing. To mitigate this effect, the CRIB would provide funding for municipalities that provide temporary property tax freezes on the development of residential units on previously commercial-zoned land.
Central to the CRIB is the concept of density. By promoting the construction of higher-density buildings, more units can be constructed using less land, which increases overall supply. There are several ways the policy aims to increase density. Firstly, the CRIB would amend several existing federal programs for the construction of affordable housing to properties that are currently excluded such as duplexes and row houses. Additionally, using a team of subject matter experts from Canada Mortgage Housing Corporation (CMHC), a standardized inclusionary zoning package will be developed and disseminated amongst participating municipalities. These projects will further contribute to an increase in multi-family housing.
Concurrently, the CRIB seeks to increase housing supply by providing regulatory frameworks that can be adopted by municipalities that permit the conversion of commercial real estate into residential units. It would also amend existing programs such as the Apartment Construction Loan Program to provide interest-free loans to developers seeking to convert commercial properties into residential units. It would also lower the eligibility requirements regarding the number of units constructed from five to two which currently excludes funding for the construction of duplexes, triplexes, and certain types of row housing. While the past four years have seen a serious decline in housing investment across all construction types, row housing and duplexes consistently lack adequate investment.
Finally, to address well-known coordination barriers, the policy would enable the development of a National Housing Portal (NHP) as a single online repository of all relevant program funding, legislation, bylaws, and points of contact for anyone involved in the construction of housing—whether that be local politicians looking for recommendations to increase density, property developers looking to navigate the existing programs available, or a private individual looking for information on incentives available to help them purchase a home. By centralizing information on funding, legislation, and incentives, the NHP will streamline access to resources for stakeholders at all levels, thereby accelerating the development process and making it easier to build more affordable housing.
Paying for the CRIB
The CRIB is an ambitious plan seeking to address a multifaceted, complex policy problem. As such, it employs a combination of novel and well-tested funding mechanisms providing up to $700 million. There are two methods by which the CRIB would be funded: 1) a modest increase in the tax on corporate stock buybacks, and 2) a novel housing bond, backed by federal properties. The 2024 federal budget proposed a 2 percent tax on corporate stock buybacks—the practice of a company purchasing shares in itself to increase the stock price—which was set to raise between $500 and $600 million per year. Increasing the tax to 3 percent per year could realise an increase of $150 to $200 million per year.
Conclusion
Implicit in this policy proposal is the understanding that the housing crisis cannot be solved by simply converting empty commercial units into residential housing. While there have been demonstrated cases of success around the world and in Canada, there are simply not enough commercial units to solve the housing crisis. Even if the number of vacant commercial properties was enough to bring supply and demand into equilibrium, the physical challenges of construction and renovation are in some cases too difficult to overcome.
This is why the CRIB seeks to address overarching issues that contribute to the reduced housing supply. It also seeks to leverage existing federal human assets to alleviate the coordination burden between local, provincial, and federal programs and jurisdictions with the development of an NHP. While the CRIB aims to accelerate housing development, it is essential not to repeat past mistakes by compromising building quality. British Columbia’s “leaky condo crisis,” which saw at least 65,000 units fail by 2003, serves as a cautionary example from the 1990s housing boom.
The proposed policies focus on streamlining administrative processes and reducing costs without sacrificing health and safety standards. Canada’s housing crisis requires urgent action that is not reflected by our current spending levels or cross-jurisdictional coordination. By addressing key structural challenges and improving coordination across government levels, the CRIB will play a crucial role in increasing housing supply without compromising quality, thereby ensuring that every Canadian can afford their own CRIB.
