The federal government is looking at how to better leverage public land to support affordable housing initiatives, according to a recent announcement from Housing, Infrastructure and Communities Minister Sean Fraser. The intent of the initiative is to develop new housing on existing federal land. The minister cited examples of constructing a 60-story residential building on top of an existing post office operation, or 20 storeys on top of an existing two-storey armoury. While there is considerable potential to create mixed-use developments, the specific implementation details have yet to be outlined.
This concept is not novel and has been previously employed to support affordable housing through various land assembly and development initiatives. For instance, from 1943 to 1960, the Victory House program facilitated the construction of homes on federally purchased and municipally leased land. Initially, these homes were rented out, but later, starting in 1949, they were sold to homebuyers.
The National Housing Act underwent amendments in 1964 and between 1973 and 1985, which provided funding for land assembly. Initially, federal funds were directed to provinces; however, after 1973, this funding was retargeted towards municipalities and non-market groups. Following the 1973 amendments, grants were offered with a focus on low-interest loans. This was often done in conjunction with housing allowances aimed at assisting low-income households.
In this latest initiative, the government should focus on households in the lowest income quintile, as this group faces the greatest challenge in finding affordable housing. This will require more than just providing subsidies through leased land and waived taxes and fees (such as application fees, development charges, and land transfer taxes). It will also require access to rental subsidies and low-cost, long-term financing. The potential cost savings are significant. Leasing land at reduced rates for extended lease periods alone could result in savings ranging from 8% to 23% of total costs.
For the government to get traction on this effort, it will need to do the following:
- Compile an inventory of federal lands available for development. Previously, the Canada Mortgage and Housing Corporation (CMHC) collaborated with Ontario to identify development land across municipalities. Similar efforts should be undertaken with federal departments, agencies, and crown corporations.
- Establish a dedicated agency to manage these assets. Given that the assets span various departments, agencies, and crown corporations, centralized management is essential. This agency could potentially operate under the purview of CMHC.
- Emulate the approach taken by the Department of Finance when establishing mandates for managing the Canada Pension Plan Investment Board (CPPIB) and the Public Sector Pension Investment Board (PSP), by creating the agency and granting it autonomy.
- Provide a mandate for this new entity to engage with private sector developers. While the agency requires real estate expertise, partnering with developers is crucial for quick and efficient project execution.
- Ensure access to low-cost funding. Projects should be eligible for programs managed by CMHC to facilitate access to favorable financing terms.
- Recognize that despite access to low-cost funding and leased federal lands, some projects may require subsidies to remain economically viable. Infrastructure Canada and CMHC should be mandated to offer a range of housing subsidy options to address this need.
Independent Opinion
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