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Affordable Housing for Cars or People?

28 February 2024

Developing government-held land is crucial to addressing the housing affordability crisis, but execution presents significant challenges. Last week, Hamilton city council faced a deadlock, with an 8-8 split vote rejecting a proposal to construct 67 new affordable homes on city-owned land currently being used as parking lots. Reaching consensus proved difficult, even though the plan would result in the loss of just 27 parking spaces overall, given the inclusion of parking in the proposed new development.

This week, council will hold a final vote, and one can only hope that the housing crisis takes precedence over parking concerns. 

Why can’t the city think bigger? The current plan involves selling or leasing the land to a non-profit provider. It would be more sensible to pursue higher density and create a mixed-use development with both affordable and market rental units. We’ve seen this approach succeed in Edmonton and Toronto when redeveloping affordable housing sites. Plus, the project would qualify for federal funding. While Hamilton would need to establish a public-private partnership (PPP), this approach offers the opportunity to address multiple issues simultaneously.

The city’s role would be to provide land, while the federal government would partner indirectly by providing financing. Existing federal funding programs already encourage affordable housing as part of such projects. The private sector would handle designing, building, operating, and maintaining the units, as well as arranging construction financing and assuming the offtake risk (that there won’t be sufficient demand for the units once they are built). 

In terms of land use, the city could choose to lease the land at a reduced rate to incentivize more affordable housing, or set a commercial lease rate and expand the project’s scope to accommodate the desired number of affordable housing units. Lease payments could then be used to further support affordable housing initiatives.

One potential challenge is the city’s bias toward working with non-profit organizations to provide affordable housing under the assumption that it saves money by eliminating the profit margin typical of commercial operators. However, this assumption overlooks the fact that non-profits may not have the same access to funding, the operational efficiency required for effective project management, or the capital reserves necessary to maintain the buildings. You only need to look at existing social housing to see how poorly some non-profit entities are being managed. For example, the Toronto Community Housing Corporation, which operates around 2,100 buildings, has one of the worst maintenance records.

Hamilton also faces two other urgent housing issues. First, it lacks affordability for families, worsened by a housing shortage that is causing house prices and rents to escalate more rapidly than in other Canadian communities (as highlighted in a report by the Smart Prosperity Institute). As a result, Hamilton risks losing the workers it will need in the future.

The second near-term issue involves addressing housing options for an aging population. Jim Dunn of McMaster University has been drawing attention to the challenges posed by an aging demographic for the past decade. He points out that the majority of seniors in Hamilton reside in car-dependent suburban areas. Taking this into account, the city could consider repurposing parking lots into mixed-use developments that integrate condominiums, apartments, healthcare facilities, recreational centers, and food retailers to better cater to the needs of seniors.

Addressing the housing affordability crisis presents both challenges and opportunities for innovative solutions – in Hamilton and in communities across Canada. A willingness to explore unconventional approaches will be key to paving the way for a more inclusive and sustainable future. 


Independent Opinion

The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any person or organization in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. Any opinions, projections, or forward-looking statements expressed herein are solely those of the author. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice including investment advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication. Readers are cautioned to always seek independent professional advice from a qualified professional before making any investment decisions.

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