By Michelle Arnold and Savraj Syan | Read the related report
Currently, Canada’s non-market housing sector makes up 3.5% of the housing system, which is only half the size of those of our OECD peers.
Growing the non-market sector is now a national priority and building the capacity of non-profits to deliver more of it is one of the most important levers available.
Unfortunately, at the very moment governments are counting on non-profit housing providers to deliver more affordable housing, a set of overlooked technical barriers is preventing those same providers from leveraging their own assets—which is key to increasing their borrowing power—to do exactly that.
The barriers are not the result of bad faith.
Rather, they are the unintended consequence of well-meaning accountability measures designed to protect public investment. But what may have made good sense as standard grant-making practice has calcified into a set of legacy constraints that actively work against the goals they were meant to serve. In a housing crisis, that kind of misaligned risk aversion has a real public cost.
Although we know this is not an exhaustive list, we want to highlight a few specific barriers that, according to our consultations in the sector, are constraining non-profit housing providers:
- Grants structured as forgivable loans — which encumber title and lock up asset value that nonprofits could otherwise use to finance new housing
- Long-term leaseholds on public land — which prevent nonprofits from recognizing land value on their balance sheets or using it to access financing and federal grants
- How depreciation and capital reserves are treated — current rules require non-profits to account for asset aging twice, placing unnecessary pressure on operating budgets
While these may seem minor, or even obscure, individually and together they create meaningful restrictions on non-profits’ ability to leverage their assets. When a non-profit is prevented, through these intricacies, from using their land, property or assets to secure potential loans, this prevents them from being able to purchase or finance land or housing that they could otherwise not afford.
We’ve outlined potential solutions to address these unintended consequences in a short paper. We believe they are relatively simple, low-cost ways to enable more non-profits to construct and expand affordable housing, while still protecting the public interest. They include:
- Converting forgivable loans to outright grants, with affordability protected through covenants registered on title
- Facilitating public guarantees that allow nonprofits to leverage the value of land they operate on
- Amending the Housing Services Act to enable alternative accounting practices that strengthen nonprofit balance sheets
- Working with CMHC to allow the value of leased land to be recognized as part of total project value
We know these are not the only barriers or the only solutions to Canada’s complex and evolving affordable housing crunch.
Based on our consultations with experts and frontline providers in the field, we urge municipal, provincial, housing and finance officials, alongside elected representatives, to consider these suggestions. We also encourage them to canvass for additional challenges and work together to standardize solutions across jurisdictions.
There are so many barriers to fixing the housing crisis. But in this case, the assets are there. The will is there. The fixes are within reach.
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Related reading
Tied Up: Unleashing Canada’s non-profit housing potential
Canada’s non-profit housing sector is structurally constrained. Well-intentioned accountability mechanisms, designed to protect public investment and ensure affordability, often have the unintended effect of limiting balance-sheet capacity, restricting access to financing and preventing asset leverage. Consequently, the non-market housing sector remains underdeveloped. In consultation with stakeholders and partners in the non-profit housing space, report authors Michelle Arnold and Savraj Syan identify three technical issue fixes that could unleash Canada's non-profit housing potential.
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