Affordable housing within reach

Letter writer makes a suggestion on tackling the housing shortage

Billions of dollars have been wasted over the decades since about 1970 in an effort to solve the low-cost rental housing problem.

At that time, the government planted the seeds which have led to the greatest housing crisis Canada has ever suffered — the lack of affordable housing, especially rental housing.

What the government did was to remove the ability of individuals to invest in rental housing and depreciate it against all, including other income. Before that time, professionals (doctors, lawyers, engineers, etc.) were the largest contributors to providing many species of market rental housing.

These people put their full income stream at risk in order to assure that the rental units survived economic downturns, unexpected repair events (leaky condos), and so on. In return, they were allowed to claim depreciation of the rental buildings against their other income, professional or otherwise. This was equitable, and economically sound. As an architect, I lived through the period in question, and had a client who immediately began buying suitable rental apartments and then converting them to strata units. This became a popular strategy, but catastrophically reduced the number of available rental units, and rapidly increased the rental of those remaining as vacancy rates plummeted.

The loss in taxes (which is deferred, and recovered upon sale of the rental units, not lost) due to this depreciation provision is relatively minor compared to the tax dollars squandered over the years in trying to rectify the low cost rental housing problem through many of the failed schemes which have been hatched still born since then.

While some projects have been relatively successful in the short term, the remaining question is quite simple.

What is more important, substantially solving the problem by the most cost effective, market mechanism, or denying a temporary tax break to those who risk their wealth while providing market rental housing?

As Abraham Lincoln is purported to have said:  “You cannot help the poor man by destroying the rich;  You cannot further the brotherhood of man by inciting class hatred.”

Admittedly, many of these investors are not providing low cost housing, but rather the opportunity for low cost housing to emerge at the other end of the equation. New, low-cost, unsubsidized housing cannot be built within the confines of the local building codes, zoning requirements, construction, and land costs. It is the older apartments which no longer have mortgages, secondary suites in existing houses, and so on which provide this category of true, low cost (both to provide and rent) housing. In other words, if the market is flooded with new market, rental housing, then this leads to true, non-subsidized, low cost housing as a result.

The proposed return to a logical tax process would not be a gift to the rich, but in fact be a rebalancing of the risk/reward equation. A moment’s thought brings one to the conclusion that this is a very cost effective solution to the supply of rental housing in general, and low-cost housing in particular. This would also reduce the pressure on the cost of ownership housing, since the lack of adequate variety in existing rental housing is forcing many families to buy, rather than their preference to rent, whatever more suitable housing might be available — unintended consequences all around the market. In summary, the federal government should permit all rental housing units to be depreciated against other income of the provider.

Whatever guarantees that can be given to assure providers that this state of affairs will be a long lasting one, should be given without reservation. It should not be seen to be a short-term, flash in the pan transfer-of-wealth program as all previous attempts at solving the problem seem, in fact, to have been.

This proposal is clean, simple, logical, democratic, and cost effective. If you believe solving the housing problem is more important than punishing the wealthy, then everything possible should be done to encourage the federal government to implement this course of action. And not incidentally, the newly stimulated construction would contribute greatly to the benefit of the economy without any front-end stimulus money from the government. In many ways, both direct and indirect, it would be like releasing hungry horses into a lush pasture.

Charles Wills, Architect, retired