Affordable-housing goals hang in delicate balance, says Bank of Canada deputy



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Work on a housing development in Toronto's Lawrence Heights neighborhood continues ahead of a visit from Prime Minister Justin Trudeau to make a policy announcement, on Wednesday November 22, 2017. The first details from the Liberal government's decade-long housing plan show early spending has helped keep some 14,000 households in affordable units.

Chris Young / / THE CANADIAN PRESS

OTTAWA – The tenuous balancing act facing the federal government's $ 40-billion housing strategy has come into clearer focus as a top Bank of Canada official warned of the challenges between ensuring economic stability and helping those in housing need.

The central bank's second-in-command told a national housing conference Thursday that the country will eventually face a point where certain decisions will need to be taken to keep the economy going – even though they may dampen efforts to make apartments and homes more affordable.

Bank of Canada deputy governor Carolyn Wilkins, whose appearance at the conference coincided with the first anniversary of the housing strategy's unveiling, pointed to the central bank's decision to lower interest rates in 2015 to inject some life into a sluggish economy as a recent example.

The unintended side effect, she said, was increases in housing prices in some of Canada's biggest cities. As a result, some people took on large mortgages, which led to a rise in household debt, while others were priced out of the market and unable to find accommodations.

"You look at social objectives and financial stability and sometimes you have to trade off," Wilkins said.

Federal efforts to cool those markets and pump billions of dollars into new affordable housing have lowered housing costs from where they could have been, Wilkins said. The question is whether the policies will continue to work in the future, particularly if the economy goes from boom to bust.

Indebted households have fragile finances and are vulnerable to economic trouble and the Bank of Canada is still concerned about high levels of household debt in Canada – particularly if interest rates rise too fast, too soon.

Central bankers from other countries attending the housing conference noted a cut in interest rates could encourage developers to build new units – but that those new units could end up being high-priced condos or rental properties, which would be little help to those who can ' t afford them.

There were also concerns about new government rental regulations and the effect on the quality of apartments.

The national housing strategy aims to build or repair hundreds of thousands of units of affordable or rental housing and eventually create a portable-housing supplement tied to a person rather than a unit.

The national housing strategy is only a few months old, with many parts of the plan having launched in April and more to roll out in the coming months.

Figures released by the Liberals to coincide with "National Housing Day" showed initial spending had helped create affordable units for some 14,000 households.

Overall, government spending since 2016 totalling $ 5.7 billion has helped more than 775,000 households.

But those figures include money budgeted annually for housing programs and not just dollars the Liberals set aside in their first budget in 2016.

Funding agreements have been signed with three provinces – Ontario, British Columbia and New Brunswick – and Northwest Territories. The government says it expects to sign funding agreements with the remaining provinces and territories by April 1, 2019.

The minister in charge of the housing strategy acknowledged the tightrope that the government must walk, but said its focus includes helping young people and vulnerable populations – such as Indigenous Peoples, victims of domestic violence and new immigrants – get into affordable units.

Social Development Minister Jean-Yves Duclos said economic and demographic changes, such as more Canadians living at home longer, have helped reinforce the government's belief that it needs to expand the supply of affordable housing.

"It's not changing our view on what we need looking ahead, but it just reinforces our view that this is making a big impact in the lives of many Canadians."

The New Democrats, however, called on the Liberals to accelerate spending plans and introduce promised legislation to enshrine the strategy, its goals and its spending into law.

"As we approach another cold Canadian winter, there is no denying that the 235,000 Canadians who experience homelessness each year – along with the 1.7 million households living in unsafe, inadequate or simply unffordable housing – can not afford to wait any longer," said NDP housing critic Sheri Benson.

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