Social Policy

FALVO – Yukon Government Balks at Using Federal Housing Dollars

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Nick Falvo asks why the Yukon Government is leaving federal housing money on the table when 16% of Yukon households are in need of affordable housing.

The Yukon Government recently announced that it will not proceed with a plan to disburse $11.7 million in federal housing dollars to for-profit developers, which would have helped build approximately 100 new rental housing units in Whitehorse.  In justifying the surprise decision, the Pasloski government used the pretext that proceeding with the plan would be unfair to other for-profit developers struggling to develop housing without the help of government funding.

Here are 10 things to know about this situation:

1. Historically in Canada, very little affordable housing―that is, housing that very low-income households can afford―has been built without federal funding.  However, when the federal government does provide financial assistance targeted to housing for very low-income households, such housing gets built (typically with matching funding from provinces and territories).  In periods when the federal government has not provided financial assistance (especially during the mid- to late-1990s) such housing usually does not get built.

2. Since roughly the 1980s, for-profit developers across Canada have generally not found it lucrative to develop rental housing—this is the case even for housing for middle income tenants (never mind for very low-income tenants).  Indeed, when purpose-built rental housing was developed in earnest by for-profit developers in Ontario throughout the 1960s and 1970s, this was done was with the help of federal tax measures such as the Multiple Unit Residential Building tax subsidy, the Assisted Rental Program and the Canadian Rental Supply Program.

3. Once upon a time, a Yukon Member of Parliament had a major role in recommending that the federal government terminate financial assistance to for-profit developers.  In the mid-1980s, at the onset of neoliberalism, the Task Force on Program Review (chaired by the Yukon’s own Erik Nielson) recommended that the federal government do away with rental assistance for for-profit landlords.  This advice was heeded, and since that time there was been very little federal assistance provided to for-profit landlords in Canada.

4. The federal funding that is currently being discussed (i.e. the $11.7 million) was born out of a ‘budget deal’ made between Paul Martin and Jack Layton.  In 2005, with the federal Liberals in a minority situation in the House of Commons, the federal NDP caucus agreed to support the Liberal budget provided it met several conditions, including $1.6 billion for housing; Yukon’s share was a lump sum of $50 million.  In 2006, most of the $1.6 billion was transferred from federal coffers to provincial and territorial finance departments.  In the intervening years, the Yukon Government has spent most of its $50 million (on housing).  The plan for the Yukon’s remaining $11.7 million would have required that the for-profit developers receiving it maintain rent levels at 95% of median rent levels for at least 10 years.  That would have helped middle-income tenants; it would not have provided direct assistance to very low-income households (for example, households receiving social assistance).

5. A lot of people in Yukon lack affordable housing.  Canada Mortgage and Housing Corporation considers a Canadian household to be in “core housing need” if, out of necessity, it is either:  a) paying more than 30% of its before-tax income on housing; b) living in housing that requires major repairs; or c) living in housing that has too few bedrooms. In the Yukon, 16% of households are in core housing need; though this rate is lower than in both the Northwest Territories and Nunavut, it is higher than in every Canadian province.

6. Federal funding for social housing in the Yukon is declining.   The Yukon Housing Corporation receives funding from the federal government to operate social housing (mostly for very low-income households). This funding covers the operation and maintenance of each unit, including the cost of power, fuel, and water. The funding is subject to operating agreements, most of which were signed several decades ago.  About one-third of the government subsidy needed to operate each unit is covered by the Yukon Government, while the other two-thirds comes from the federal government.  This funding will soon run out.  In fact, as things currently stand, by 2031 there will be no federal operating subsidies at all.  What’s more, the Pasloski government has no plan in place to keep current social housing units operational after these funding agreements expire.

7. When the Yukon Housing Corporation (as opposed to a for-profit firm) develops housing, the key difference is that now a non-profit entity owns and operates the housing.  A key advantage of a non-profit entity owning and operating is that there are very few incentives for those who operate the housing to turn a profit (and therefore few incentives to ‘jack up’ rent levels over the long term).  Staff and board members of the Yukon Housing Corporation, for example, are forbidden from personally profiting from the housing under their purview.  The Yukon Housing Corporation, which has a mandate to provide housing to very low-income tenants, has an incentive to keep rent levels low.  If rent levels were to rise too high, that housing would be put out of reach of its tenants and the territorial government would (rightfully) face a political backlash.  For reasons that remain unclear, the Yukon Government was not planning to have the Housing Corporation own and operate units built with the $11.7 million in question.

8. The Harper government may try to use this recent decision as a political football.  Prime Minister Harper has made it clear that his government would like to both tax less and spend less going forward.  In last fall’s throne speech, the federal government noted: “once the budget is balanced, our Government is committed to greater tax relief for Canadian families.”  With this recent decision by the Yukon Government, the Pasloski government has given Mr. Harper an early Christmas present.  Indeed, when asked by members of opposition parties and advocacy groups what the federal government plans to do improve the housing situation of hundreds of thousands of low-income Canadians, the Prime Minister can simply point to this decision as proof that there is questionable take-up on the federal dollars that have already been put on the table.  This could cause considerable embarrassment for other territorial and provincial governments when they attempt to lobby the Harper government for more housing dollars.

9. One sensible way forward would be to build the units and ‘stack’ some of them with rent supplements.  This $11.7 million can still be spent.  It’s not going anywhere for the time being.  One approach that the Yukon Government could take would be to give this $11.7 million to for-profit developers (as originally planned); allow the for-profit developers to own and operate the units; and ‘stack’ one-third of them with rent supplements, which would be financed by the Yukon Government.  For example, a $350 monthly rent supplement would allow a “single employable” adult on social assistance to live in an $850/month rental unit without exceeding the maximum shelter rental allowance to which they’re entitled.[1]  (Incidentally, a similar approach was recently used with the world-renowned At Home/Chez Soi project, which I’ve blogged about here.)  Yukon―along with Alberta―has no public debt, meaning the Pasloski government could hardly claim it can’t afford to do this!

10. If no for-profit developer is willing to build units on condition that one-third of them be ‘stacked’ with rent supplements, the Yukon Housing Corporation could always develop the units itself.  Some for-profit developers would likely not want to own and operate units if there were a requirement that one-third of them be occupied by very low-income tenants.  And in fairness, many for-profit developers lack the expertise to work with vulnerable populations.  If that turns out to be the case (and there is no take up on such a proposal), the Pasloski government could simply direct the Yukon Housing Corporation to use the $11.7 million to develop housing of its own―units that it would then own and operate.  Ideally, units would go to households from a variety of income groups, a feature known as “income mix.” Some of the units could be rented out at the full $850/month, without additional subsidy.  Others could be stacked with rent supplements (making them affordable to very low-income tenants, including social assistance recipients).  There could even be a third category of units that would receive a more modest rent supplement (possibly in the range of $200-$250/month)―this third category of units could be targeted to ‘working poor’ households.

Notes

Nick Falvo is a PhD Candidate in the School of Public Policy and Administration at Carleton University.

Postscript: A) Several individuals―whose anonymity I wish to preserve―have provided very helpful input into this blog post. B) In 2012, under the supervision of Dr. Frances Abele, I wrote a policy report on poverty in the Yukon which can be found here.

[1] Two things are worth noting here.  First, rent supplements are usually easier to implement when vacancy rates are relatively high (because landlords are usually more eager to rent out their units in such a context).  With Whitehorse vacancy rates currently just above 3%, now would be a relatively favourable time to try such an approach.  Second, with this rent-supplement approach, for-profit developers who are not recipients of this money might not feel as disadvantaged as in the previous scenario, as now the funding would come with some conditions.

Photo credit: “Whitehorse looking southerly 1924” by WanderingWhitehorse under a creative commons license.

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  • Gareth

    Median rents appear to be rising despite vacancy rates of 3% which would seem to contradict the government’s claim that constructing affordable housing endangers the economic viability of for-profit housing development. Under what conditions do rents rise and the supply of units? Is this a case where the statistics obscure how much the housing market is segmented with growth in higher income rentals and stagnation in affordable housing?

  • Ridha Ben Rejeb

    Interesting and thought provoking article here is the core future scenario as I perceive it
    today:

    1- Yukon―along with Alberta―has no public debt, meaning the Pasloski government could hardly claim it can’t afford to do this!

    2- The Harper government may try to use this recent decision as a political football

    3-This could cause considerable embarrassment for other territorial and provincial
    governments when they attempt to lobby the Harper government for more housing
    dollars.

    4- This funding will soon run out. In fact, as things currently stand, by 2031 there will be no federal operating subsidies at all. What’s more, the Pasloski government has no plan in
    place to keep current social housing units operational after these funding agreements expire.

    My Conclusion : Situation 1 in Yukon will not sustain past 2031 and I argue that Yukon future government by then will regret the decision of the current Yukon policy makers- situation 2.

    My guesstimate that the potential Yukon government by 2031 will find itself in situation 3 in the same shoes as many provinces and territories in current times . This is as a result of lack of vision and poor planning as stated in situation 4.

    Literally, the Pasloski government message is the following “ We should save our back and live day to day, I should not worry about the future, whoever is going to take over
    from us should manage things in the same way as we managed ( or mismanaged) now. Our intent is that people in 2031 will long for the golden days of 2013 onwards of Pasloski ( covet of Harper) government, when they said NO to federal funding, by then the dream will be gone forever and become a farfetched wish.