Federal government funding affordable rental projects that aren’t look affordable
Analysis of rental data reveals 87 of 177 rental projects approved through Ottawa’s Apartment Construction Loan Program exceed what a typical renter household can actually afford to pay
When the $86-million low-interest loan for SoHo Italia apartment tower in Ottawa was announced in the summer of 2020, the federal government press release led with the line: “Every Canadian deserves a safe and affordable place to call home.”
The project would provide housing for the middle class and “those working hard to join it,” said Ahmed Hussen, the cabinet minister then responsible for the Canada Mortgage and Housing Corp., which lent the money under the largest program in the Ottawa’s national housing strategy.
Today, according to CMHC, all 250 units in the new building – which the SoHo’s website touts as “the finest luxury rentals in the city” – meet the loan program’s definition of affordability.
Except the average affordable cost for a SoHo apartment exceeds what a typical renter household can actually afford to pay. That’s also true for 87 of 177 rental projects approved through Ottawa’s Apartment Construction Loan Program (ACLP), a Globe and Mail analysis of CMHC rental data has found – data that highlight a disconnect between how the government has touted the program and what it is actually achieving.
The problem with the program, housing advocates say, is rooted in how CMHC determines affordability. Developers are eligible for the program’s low-interest loans if at least 20 per cent of their new units can be rented for less than 30 per cent of median household income of all families in the particular city where they are being built.
In the case of the SoHo, a 500-square-foot one bedroom starts at $1,760, plus utilities, which works out to about 17 per cent of the median household income for Ottawa, $125,520.
The rent looks much pricier when compared with a different number, one that experts say is a far better indicator of affordability – median income for renters. The median income for an individual renter in Ottawa is $41,800, which would make the rent for that SoHo apartment more than half of a typical renter’s income.
Even the median renter household in Ottawa – that includes two incomes – only makes $66,300 annually, according to the most recent data from Statistics Canada. This puts the SoHo’s two-bedroom, starting at $2,320 a month, out of reasonable reach as well.
By relying on median household income – which encompasses both renters and homeowners, who outnumber renters and have incomes that are nearly twice as high – CMHC is using a flawed base measurement to determine affordability, critics say.
The income gap between households who own and households who rent is wide. In Canada, median income for all families – renters and owners – is $98,390. The median income for a typical household that rents is $57,900.
The program, which now totals $55-billion after a top up this month from the federal government, has helped finance 31,840 rental units since its inception, according to CMHC data. The program also sets a cap on total rental income that a building can make but that’s still not enough to make a big difference.
What it considers “affordable” is out of whack with reality, said Steve Pomeroy, who runs his own housing policy research company, Focus Consulting Inc., and has analyzed the ACLP extensively.
Though, even if CMHC linked project financing to a lower affordable rent, developers say they wouldn’t be able to build because the cost of construction is prohibitive.
“Any supply is good,” Mr. Pomeroy said. “But if you’re pretending that it’s affordable, it’s not. That’s just deceitful.” It’s all the more problematic, Mr. Pomeroy said, that the program is the largest in the government’s national housing strategy, which is supposed to prioritize housing for “those in the greatest need.”
According to the Globe analysis of 177 projects funded through the program, half of the projects approved for loans had average affordable rents that are not affordable to the typical household that rents rather than owns. (The analysis relied on the national median renter household income).
For single-income renter households, only 11 are affordable. Minimum-wage workers could cover the rent in just nine projects. The Globe obtained the average affordable rents for those projects, which were awarded loans between 2017 and 2023, through an Access to Information Act request. That information has not been previously disclosed by CMHC.
One of the highest average affordable rents is at a 270-unit Winnipeg project designated for seniors, which received an $86.75-million loan. The average affordable rents are listed on CMHC documents as $2,018 per month. But the average market rent for a two-bedroom apartment in a purpose-built rental building in Winnipeg, according to CMHC’s latest rent report, is $1,427.
In some cities, CMHC’s affordability measure actually allows rents higher than what landlords could even expect to charge. In Winnipeg, four projects had higher average affordable rents than average market rent in the city. Developers are only required to maintain those rents for 10 years, although municipalities have often lengthened those timelines.
In fact, the ACLP defines an “affordable rent” that is so high that most renters would have to double their income to make their monthly payments. The median affordable rent falls at $1,447 for the projects. Compared with the monthly wages of 512 occupations provided by Statscan, the government’s threshold for affordability would be out of reach for 270 jobs, from cashiers to daycare workers to transport truck drivers.
Although the records released by CMHC provided a single number, described as the average affordable rent, for 177 of the ACLP projects, there were 19 projects where such a figure was not yet available.
CMHC declined to provide an average rent per unit size to The Globe, saying it was proprietary information for the developers. The Globe reached out to 30 developers; seven provided individual rents.
But while there’s no question that using a lower measurement such as median renter income would result in cheaper required rents, developers say that criticism overlooks an essential consideration – none of them would have built apartments for rents at that price because their profit margins would be too small or non-existent.
“Nobody would pursue the financing,” said Dan Dixon, senior vice-president of corporate affairs for Minto Group, a major Canadian housing developer that has borrowed through the program.
“It’s a delicate balance for CMHC,” he said. “They want to have social benefits, but the project math still has to work or nothing will get built.”
SoHo’s developer, Mastercraft Starwood, agrees. Its president, Bruce Greenberg, said the tower would not have been feasible with stricter affordability measures under the current program – and, given the rising costs of construction, could not be built again today under those same rules.
This explanation was even offered by some of the non-profit corporations that have borrowed from the program. The data show 20 such non-profits have used the ACLP to construct housing. Stephen Bennett, the CEO of Affordable Housing Societies, which is based in British Columbia, said he also did not believe that he could have made his project work if he had used median renter income as opposed to median household income.
When asked why CMHC opted not to use median renter income, a spokesperson for the agency emphasized the program’s impact on Canada’s housing supply shortage, saying the program has spurred construction of apartments that wouldn’t otherwise have been created. The vast majority of projects, however, still went ahead without the ACLP: The total units built account for only seven per cent of all new rentals started in the same period.
“The ACLP delivers below-market rents that are lower than what a new market development would rent at,” said Leonard Catling, a spokesperson for CMHC. “The ACLP focuses on creating purpose-built rental housing for middle-class individuals and families,” he said.
A review of government press releases shows the language it has used to describe the program has markedly changed over the years. In the first few years of the program, Ottawa stressed that it was available to borrowers who “want to build affordable rental housing in Canada.”
Over the past two years, however, the word “affordability” has largely disappeared from ACLP press releases, though it is still a requirement in the program.
Regardless of what the ACLP has helped build, the government’s definition of “affordable” does not sit well with a number of middle-income renters interviewed for this story.
In Victoria, a new project slated to be completed next year, will have average affordable rents of $2,028 for 100 of 105 units, according to the data released by CMHC.
“That is messed up,” said Kevin Savage, 48. He, his partner Christabel and his son were evicted from their two-bedroom condo in downtown Victoria in early 2023 after their landlord told them they needed the property for themselves.
His family had to settle for a rental about a 30-minute drive from downtown where they run their swing dance business, Red Hot Swing. They pay $2,100 a month plus utilities. They fill up their car as much as twice a week compared with every other week. They have added classes to help offset the higher rent and gas expenses.
In Halifax, a new project close to the university, will have average affordable rents of $1,993 per month for 43 of the building’s 101 units, according to the CMHC data.
“The average working individual in this province would not be able to afford that,” said Aundrea Cocco, a 31-year old accountant who spent a year looking for a place to rent in the Halifax region after she broke up with her boyfriend and could no longer afford the $2,200 townhouse they’d shared. Today, even with her 546-square-foot rental, she spends half her salary on housing costs.
“I’m a good example of somebody who has a decent career and salary base,” she said. “I should be able to easily afford to rent a one-bedroom. But you know, it was a struggle.”
This article was first reported by The Globe and Mail
