Designing a Federal Housing Program with the Help of Cities

Helping Cities build more homes

Co-authored by: J. Barrett and L. Dhofier.

This opinion piece was co-authored with my colleague at the Canadian Urban Institute (CUI). It is based on our work in designing the Housing Accelerator Fund (HAF), a Federal government of Canada’s $4B funding program to accelerate the construction of homes across Canada. Original article can be found on Municipal World.

The shortage of housing supply is a hotly debated issue in Canada. A 2021 report by Scotiabank suggests that Canada’s ongoing housing crisis is rooted in the “chronic insufficiency of home supply,” highlighting the fact that Canada has the lowest number of homes per 1,000 residents compared to its G7 counterparts. The same narrative is echoed by Murtaza Haider, a Toronto Metropolitan University professor who argues that supply is both the main cause and solution to the housing crisis in Canada. On the other hand, BMO Capital Market economists argue that the supply shortage narrative is overstated. CUI research also suggested that the creation of residential units in Canada grew faster than its household growth from 2016-2021. While Canada’s housing problems are more complex than mere supply and demand gaps, there is a recognition that increasing the supply of housing is crucial to address the ongoing housing crisis in the country. The challenge lies in making sure that the housing built addresses local housing needs.

The federal government’s Budget 2022 includes a $4 billion investment to deliver a new Housing Accelerator Fund (HAF) to create 100,000 net new housing units over the next five years. In response, the Canadian Urban Institute (CUI) worked with the Big City Executive Partnership (BiCEP) to coordinate insights and recommendations from eight of Canada’s largest cities on how the HAF could be most effectively designed and implemented to accelerate the provision of housing units in those key markets and reflect local challenges and opportunities.

To develop the ‘best policy advice’, CUI launched a “Design Sprint,” undertaken in collaboration with the Canada Mortgage and Housing Corporation (CMHC) and the Federation of Canadian Municipalities (FCM), to gather input from the Big City Executive Partnership (BiCEP), a partnership between Canada’s eight largest cities convened by CUI. BiCEP is led by City Managers and Chief Administrators and supported by senior management, in eight of Canada’s largest cities. BiCEP was formed with three main objectives: to forge relationships and share learning among its members; to strengthen partnerships and collaboration between BiCEP and other levels of government; and to seek out new ideas and approaches to the challenges faced by Canada’s largest cities. In the early months of COVID, BiCEP was instrumental in helping senior staff work to collaboratively problem solve and share ideas in an unprecedented time. In the context of HAF, BiCEP provided a valuable platform for providing program design and implementation advice to the federal government. In addition to working with key municipal staff, through the BiCEP membership, CUI also engaged housing experts and industry representatives from across the country to gather their input on the design and implementation of the HAF.

The culmination of CUI’s work undertaken with BiCEP underscores the importance of coordinating integrated planning and investment that connects federal policy and spending priorities with local needs and capacity.

The 12-week Design Sprint drew on the collective knowledge of key municipal stakeholders and other housing experts to identify program design principles, investment categories, and a detailed understanding of each City’s unique housing supply needs. The Design Sprint produced a set of high-level principles to guide the design and implementation of the HAF. These six principles are:

  • Flexible – the HAF should provide maximum flexibility on eligible costs, types of supply, and other parameters
  • Performance-based – the HAF should reward Cities’ achievements in increasing the housing supply and not penalize Cities for their achievements in increasing the housing supply
  • Simple – the HAF must be transparent and minimize complexity for all levels of government and other stakeholders
  • Predictable – the HAF should provide a high level of predictability on funding eligibility, amount, and timing
  • Aligned and stackable – the HAF must be aligned with federal and municipal housing priorities and be stackable with other federal and provincial housing programs
  • Rapid – The HAF must be deployed quickly and responsively while unlocking or incentivizing opportunities in cities and city-regions
  • Transformational – the HAF must reward activities that transform planning and approval processes to increase the housing supply

These principles helped to inform program design advice aligned with specific City housing needs and areas where Cities could have the greatest influence on increasing the housing supply.

Housing is a complex issue and varies from one city to another

The Design Sprint process helped unpack the diverse local contexts and concerns that necessitate each City to accelerate housing supply specific to their needs and opportunities. For example, Vancouver and Toronto, the two cities with the hottest housing markets in the country, are geographically constrained and rely on infill development, which, from a planning and servicing standpoint, is more complex than greenfield development. Meanwhile, Edmonton, Calgary, Ottawa, and Halifax are still developing housing in undeveloped areas of the city while also trying to address and increase infill housing and housing affordability through a variety of mechanisms including policy, incentives, and process improvements.

The details revealed through in-depth engagement with Cities and stakeholders reinforced the argument that Canada’s housing crisis is more than just a supply shortage issue. For example, the Design Sprint’s findings suggest that certain types of housing are more difficult to produce while also being those most in need; this includes the decline in purpose-built rental housing, the escalating problem of housing affordability, and housing built to ensure that households are living close to public transit, jobs, and essential services. Physical constraints or pre-existing characteristics such as contaminated lands, infrastructure capacity, and context-specific adjacencies are limiting the ability of denser cities to develop housing units. As such, increasing the housing supply without considering these local contexts and challenges will not work. To be successful, the Cities argued, HAF had to account for the specificity of each context and to solve the unique situation in each municipality.

Cities’ priorities and preferences

CUI worked with representatives of each of the eight BiCEP Cities to create “Policy Briefs” to summarize, understand and communicate housing needs and housing supply issues, which were substantiated by a variety of data. This information was supported by knowledge of the development pipeline to understand the number and type of housing units within each City’s planning approvals process and to define the municipal levers to move more units through the development process.

Through these detailed Policy Briefs, the HAF engagement process aimed to answer the following question: “What types of investments and actions on the part of municipalities will make a significant contribution to HAF program goals?” The answers provided by the eight Cities can be combined into four areas of investment or intervention: 1) planning and policy; 2) process improvements; 3) land and infrastructure investments; 4) targeted incentives for certain unit types. Many Cities also identified capital funding for affordable and below-market units as a key priority, yet this was not included in the four investment categories as HAF was explicitly not intended to focus on funding for specific housing projects.

In addition to establishing the areas where Cities could most impact housing supply delivery, the Design Sprint also identified where the Cities could not. There was clear feedback that many of the issues impacting the delivery of housing are out of the purview of the Cities, namely supply chain issues, cost of financing, labour shortages, and developer speculation or lack of capacity. City representatives also noted that a great deal of work had already been undertaken to speed up approvals and bring more units to market. They suggested that HAF should not, therefore, penalize the early adopters of planning and process changes, nor should it set a target for new development based on recent housing creation that would punish Cities that had accelerated their housing supply in previous years. Cities also communicated that HAF should have some conditionality linked to specific, local housing needs and supply issues so as to not simply reward housing that would otherwise already be built. Finally, Cities agreed that for HAF to be successful, other programs of the National Housing Strategy would need to be evaluated, revamped, and fully funded. Otherwise, there is the risk that Cities will look to HAF to fund housing gaps where other programs have not.

Conclusion and Reflection The Design Sprint illustrates the level of complexity in Canada’s housing market and the importance of drawing lessons from local expertise to understand the unique situation in each city. Coordinating integrated planning and investments that connect federal policy and spending priorities with local needs and capacity is therefore paramount to the success of federal housing programs. The Design Sprint also shows that housing cannot be considered in isolation from other urban investments. Housing needs to be integrated with transit and economic development into coordinated plans that reflect local priorities and capacities. The design and implementation of federal housing programs must therefore be a multigovernmental and multistakeholder process where local officials and stakeholders are engaged in a meaningful way, and where conditionality is built into the program to provide opportunities for Cities to align local housing goals with national priorities.

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