Affordable Housing: Lessons from Canada

The corruption scandal at the Department of Housing and Urban Development (HUD) has been popularly reported as a story of how Reagan Administration officials steered scarce subsidies to political insiders. That picture is accurate, but the real issue at HUD concerns the roles that government, private developers, and community organizations ought to play in an effective national program for affordable housing.

The public is rightly skeptical of programs that offer big profits to politically connected developers and consultants in the name of housing the poor. However, the solution is not to scrap federal housing programs, as some conservatives suggested in the wake of the HUD uproar. Instead, we should learn from the successes of our neighbors in Canada and of other industrial nations like Sweden, Holland, and France, which target government housing funds to nonprofit community developers. Unlike HUD, their programs are virtually corruption-free, and they do a better job of supplying housing to the poor and near-poor than do programs emphasizing incentives to commercial developers.

The Canadian Approach
The housing systems of the United States and Canada are similar in many respects. Most housing is constructed by private builders and financed by private lenders. Almost two-thirds of households own their own homes, primarily single-family houses. In Canada, as in the United States, housing prices have skyrocketed in the largest urban areas, particularly in Vancouver and Toronto. Middle-class citizens in both countries complain about the increasingly elusive dream of homeownership. But for Canada's poor and working-class residents, housing conditions are considerably better than they are for their U.S. counterparts. Canada has no slums to match the physical and social deterioration in our inner cities. Nor are Canada's cities overwhelmed with citizens sleeping in shelters, streets, and subways. Of course, there are homeless people in Canada and many lower-income households have great difficulty affording the housing they need, but they are relatively fewer in number.

What accounts for these differences? Put simply, Canada's governments -- federal, provincial, and local -- have made a commitment to assist those not served by the private housing marketplace. There is widespread agreement that the market cannot do some things well, even if massive subsidies are handed to private firms. An official report by the Canada Mortgage and Housing Corporation (CMHC) acknowledges that "the private market, even if operating efficiently, [is] incapable of providing adequate housing at an affordable cost for every Canadian." It is hard to imagine HUD (CMHC's counterpart) making such a statement.

After experimenting with U.S.-style public housing programs in the 1950s and 1960s, Canada's federal government switched to what Canadians call "social housing." Since the mid-1970s smaller-scale, socially mixed housing projects have replaced big government-owned public housing projects. Social housing is developed and owned by the "third sector," comprised of community-based organizations that are neither governmental nor corporate.

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Canada, with 25 million inhabitants, subsidizes a slightly greater fraction of its total housing supply than does the United States. There are some 550,000 subsidized rental units in Canada, compared to 4.3 million in the United States. Fairly traditional public housing projects provide about half of Canada's subsidized rental housing, while social housing projects developed over the past 15 years have produced the other half. By U.S. standards, Canada's public housing is very well-managed. While Canada has a few high-rise public housing developments with heavy drug use and related crime problems, it has nothing to match such ugly, crime-ridden,

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