By Nicholas Gazzard

Amid all the economic turmoil over the past year, it’s been easy to lose sight of the causes of the credit crisis. We’ve all been focused on the fallout: bank failures and bailouts, lost jobs, lost homes, losing industries, the drying up of credit—all symptoms of the worst economic downturn in most people’s living memory.

And yet it’s worth looking at the origins of this mess for some lessons housing policy makers can learn from it. Because the current crisis really has its roots in a failure of housing policy in the United States. Squeeze every possible household into homeownership, so the thinking went, and—presto—the housing problems of U.S. citizens are solved.

Buyers were lured by easy credit and “teaser” mortgage rates. Lenders didn’t care who the borrowers were. No job? No income? No problem. The lenders’ security was the ever-rising housing market. Besides, all that mortgage debt was being sold off anyway, and repackaged into increasingly esoteric securities (read: toxic assets) that found their way into investment portfolios around the world. It was like a game of high-stakes musical chairs with the housing bubble supplying the beat. And when the bubble finally burst, no one could find a seat. Including all those families that lost their homes.

So what can we take from this? For a start, let’s agree homeownership isn’t the holy grail of housing solutions. It’s clear that nonownership solutions must be an integral part of any housing strategy, in the U.S. and in Canada.

This is especially true for lower-income households. In Canada, close to 13 percent of households cannot find decent, adequate housing they can afford, a figure that adds up to close to four million Canadians in housing need. If the solution is nonownership housing, where will it come from?

Unfortunately private market rental development isn’t the answer. The financial realities of residential construction are that developers can’t deliver new rental housing at rents people can afford to pay. That’s not a political point of view; it’s simply the reality of real estate economics.

So how about shelter allowances, or government assistance to market developers? Shelter allowances have a role to play, especially to address short-term affordability issues. But on their own they won’t increase the supply of affordable housing in markets that desperately need it—witness the rental vacancy rates of close to zero in Vancouver and Victoria. And government assistance to market rental development—key policy initiatives from the 1960s and 1970s—has not resulted in lasting affordability or in permanence of tenure: much rental stock has been lost over the years to condo conversion.

Nonmarket solutions must be an integral part of any solution to Canada’s shortage of affordable housing. From the early 1970s to the mid 1990s, and later in British Columbia, nonmarket housing came in the form of government-sponsored community housing programs that fostered the development of mixed-income, diverse communities in co-operatives and other nonprofit housing developments. This housing is still serving the housing needs of Canadians today. We need more of it.

Over the past three years, the present federal government has put over $5 billion on the table for housing—over $4 billion since September last year alone. So the recession has indirectly brought some hope for affordable housing in Canada. The question is what use is to be made of this funding by B.C. and other provinces that will actually get to spend the money in program transfers. So far in this decade, B.C. has put its share of housing transfers into assisted living for seniors and other housing solutions for vulnerable population groups. That’s commendable. But families, especially families with children, have been shut out, and that’s got to change.

That’s why my organization, the Co-operative Housing Federation of Canada, is challenging the federal government to set goals for housing need reduction across all demographics. In exchange for housing transfers to the provinces, we are advocating that Ottawa should require measurable outcomes. Targets must be set for a reduction in the percentage of Canadian households in housing need. The current 13 percent is not acceptable at all.

It’s one thing to learn policy lessons from the financial crisis. It’s another to put them to use to house Canadians affordably.

Nicholas Gazzard is the executive director of the Co-operative Housing Federation of Canada.