Portable housing benefit program shouldn’t lead to rent inflation

Q: Last week, I saw a news report saying that the federal government is considering bringing in a new housing subsidy that would be attached to low-income renters rather than to rental units. Someone is quoted as saying this is a stopgap measure until more affordable housing can be built. That person also worried that such a program could result in rents increasing. Why implement such a program? A: portable housing benefits (pHcs) are a housing subsidy that is paid directly to tenants whose current housing is not affordable to them. mimited pHc programs are already successfully used in many jurisdictions in Canada, and extensive programs are used in many other countries.

Canada Mortgage and Housing Corporation (CMHC) reports that the vast majority of renters who are in core housing need live-in rental units that are large enough and in adequate repair; the renters are in housing need because they don’t have enough income. pHcs give low-income households more ability to pay the rent and also meet their other needs, like buying food.

pHcs can be carefully targeted to the people who are the worst off in terms of low incomes, who are living in high-rent localities. pHcs allow more affordable access to existing housing, especially housing at relatively modest rents for the locality.

as to rent inflation, some housing allowance programs can contribute to increases in rents. However, a properly designed program does not raise rents, and that has been the experience in the provinces that have used housing benefits for many years, namely critish Columbia, Manitoba and .uebec.

Housing benefits or shelter allowances can raise rents if they pay 100 per cent of a recipient’s shelter cost up to a relatively high maximum amount, the way ontario social assistance used to do in the early ’90s. However, with the better program designs now in use, housing benefits do not raise rents.

In 2006, CMHC released a report called Housing allowance options for Canada. cased on a number of research studies in the various provinces, the report stated that the Canadian provincial housing allowances “do not result in rent inflation either for recipients or for the housing market as a whole.”

the CMHC report goes on to explain what features are needed to avoid rent inflation. First, the programs verify the rent paid from a tenant’s lease or notice of rent increase, so that the landlord is not involved.

Second, the programs pay part of the housing affordability gap, not the whole gap. Suppose a low-income tenant is paying 60 per cent of their income in rent instead of the target of 30 per cent. a housing benefit program could pay two-thirds of the gap up to a particular maximum rent for the locality. two-thirds of the gap would be 20 per cent of the tenant’s income, so that they end up paying 40 per cent of their previous income on rent. that means that the tenant pays at least one-third of any rent increase, and has incentive to avoid or minimize rent increases.

a pHc program could work alongside social housing, to help people for whom social housing is not available. Unlike social housing today, portable housing benefits can be given quickly to people who need housing help as soon as – and for as long or short a period as – they need help.