“Their front-end loading plan is a recipe to bankrupt housing providers right across the country.” – Liberal MP Adam Vaughan
Toronto Liberal MP and long-time social housing advocate Adam Vaughan was blunt in his assessment this week of the federal New Democratic Party’s latest proposal for affordable housing.
Even before listening to the formal announcement Monday from Jagmeet Singh, where the NDP leader called for the creation of half-a-million affordable housing units if elected prime minister, Vaughan dismissed the opposition party’s plans as unrealistic.
Did he go too far in suggesting that a plan to speed up the construction of more affordable homes would be destructive for the housing development sector?
Spoiler alert: The Canadian Press Baloney Meter is a dispassionate examination of political statements culminating in a ranking of accuracy on a scale of “no baloney” to “full of baloney” (complete methodology below).
This one earns a rating of “some baloney.” Here’s why.
On Monday, the NDP announced what Singh called the first part of his plan to build 500,000 affordable housing units across the country over the next decade.
Singh said affordable housing development could be spurred by removing the GST, or the federal portion of the HST, from the cost of building new, affordable units.
He also challenged Prime Minister Justin Trudeau to use the upcoming federal budget to provide “immediate relief” to low-income renters.
And he demanded the Trudeau Liberals “fast-track” direct investment into cooperative and non-market housing before the next election, which is scheduled to take place October 21.
It is that fast-track approach where Vaughan took issue, warning that the NDP’s “front-end loading plan is a recipe to bankrupt housing providers right across the country.”
Housing is considered “affordable” in Canada if it costs less than 30 per cent of a household’s before-tax income, according to the Canada Mortgage and Housing Corporation.
It’s not just a term for homes subsidized by the government. It can include everything from private to public to non-profit housing that can be occupied in all forms, be it rental, owned, temporary or permanent housing units.
Nearly 1.7 million Canadian households were considered to be in “core housing need” in 2016, according to Statistics Canada.
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The prime minister announced a housing strategy in November 2017 that included plans to spend $40 billion over a 10-year term to create up to 60,000 new affordable units, make repairs to 240,000 existing units, create a new housing benefit for low-income tenants and reduce overall homelessness.
The Liberals promised during the 2015 election campaign to remove all GST on new capital investments in affordable rental housing. However, a government website dedicated to tracking various commitments made by the party said the proposal is “not being pursued.”
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Jeff Morrison, executive director with the Canadian Housing and Renewal Association, said there’s a little baloney being served up on both sides of the latest pre-election affordable housing debate.
For a start, Singh has accused the Liberals of effectively sitting on their hands and doing little to combat Canada’s housing crisis, despite the government’s announced housing strategy.
While it’s true that a lot of money earmarked for housing would ultimately be spent after the next election – it is, after all, a 10-year plan – some of the major components of the Liberal strategy are already in play, said Morrison.
“Applications are being accepted now for things like new construction and renovation projects,” Morrison said.
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But Morrison said he was puzzled by Vaughan’s comment about bankrupting housing builders or providers if money rolled out sooner to project developers.
“I’m not sure what he means by bankrupted,” he said. “I’ve never known anyone to go bankrupt from getting money.”
Greg Suttor, senior researcher at the Toronto-based Wellesley Institute, was also scratching his head over Vaughan’s use of the term “bankrupt.”
But Suttor said he understands Vaughan’s point that ramping up affordable housing construction the way the NDP is proposing – without knowing exact details on how it could be done – would be difficult for the housing sector to absorb.
The simple math of breaking down a promise of 500,000 affordable housing units over a 10-year period would mean creating 50,000 units annually, he calculated.
“That’s an awful lot,” Suttor said.
“That is more or less equivalent to a quarter of total production of housing by the private sector in Canada.”
Home builders have been producing roughly 200,000 or more homes, nationwide, annually in recent years, Suttor noted, with current social housing units constructed at a rate of 5,000 to 10,000 each year.
Building 50,000 units every year would be double what Canada used to see constructed in what Suttor called the “heyday of the 1970s and 80s” when roughly 20,000 to 25,000 affordable rental units were created annually.
Given the scale of those numbers, Alina Turner, a fellow at the University of Calgary’s school of public policy, said she can see some truth in Vaughan’s concerns about putting too much pressure on Canada’s social housing sector.
How the sector would be impacted would depend a lot on how new affordable housing is financed, she said.
Designating new housing investment as grants would be easier, and less risky, than loans, said Turner.
Canada’s non-profit housing sector, which would face much of the pressure to spend money allocated by the federal government, isn’t prepared with new projects ready to go at the signing of a cheque, she said.
“They don’t necessarily have the capacity to spend the money,” Turner noted.
“There is often times this expectation that if (government) puts the money out, it’ll naturally just get eaten up, but that is not actually the case.”
Rather than bankrupting the sector, she said, a sudden influx of cash for housing above normal levels may be “detrimental” to the ability of non-profit agencies to execute additional housing projects.
Experts largely agree that ramping up spending on building affordable housing units too quickly would likely cause problems for those managing the projects, particularly non-profits, if they are not prepared for the sudden infusion of cash.
Like with most political pledges, they say, the devil is in the details, especially when it comes to how the NDP proposes to pay for the new construction.
But experts question Vaughan’s suggestion that housing providers would go belly up in the process of creating additional housing units.
For those reasons, the Liberal MPs comments are deemed to contain “some baloney.” His statement is partly accurate but Vaughan went over the top by warning that the NDP’s affordable housing proposal would cause bankruptcies across the country.
The Baloney Meter is a project of The Canadian Press that examines the level of accuracy in statements made by politicians. Each claim is researched and assigned a rating based on the following scale:
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