07/19/2022
What if public housing could pay for itself?
Sounds great, right?
Well, according to a report by the Canadian Centre for Policy Alternatives (CCPA), it’s a possibility.
Private sector developers already follow the self-financing housing model, so why can’t governments?
The formula is simple: leverage public housing rental income to cover upfront development costs.
Even taking into account that public housing rents are lower than market rental rates, the formula could still work. Governments can not only borrow at cheaper interest rates to private-sector developers, but can pay that debt off over a longer period of time (sometimes 50+ years).
In Vancouver, Canada, for example, the CCPA found that for a non-profit development, the range of break-even rents for a one-bedroom could drop to between $1,357 to $1,995, and $1,765 to $2,597 for a two-bedroom. Comparably, to break even, for-profit development would demand between 43-49% higher rents for the equivalent number of units.
And that’s just the start. Break-even rents could be even lower with faster permitting processes and the expansion of modular construction.
Cheaper borrowing + a longer time to pay off the debt using below market rent = more affordable rentals and public housing that could pay for itself.
Private-sector developers are stretched thin trying to build enough affordable housing alone. An expansion of public-led approaches and non-profit development could help.
It’s not the whole solution, but it could help to increase the pace of building.
Think this could work where you live? Let us know in the comments 👇