We Have to Help Nonprofits. Let’s start with taxes.
In several major Canadian housing markets, pressures have eased to the point that asking rents are falling for the first time in years. While this offers welcome relief for some households, the broader context matters. The decline follows roughly a decade of sustained growth in shelter costs that far outpaced inflation in other goods and services. Wage growth, unsurprisingly, has not kept pace.
Despite softer markets, there are still clear signs that Canadians across the country are struggling with high housing costs. The rapid growth of visible and hidden homelessness is the most severe symptom. With housing insecurity rising and prices declining only modestly, it could take years for these trends to converge. It would be a serious mistake to treat the recent decrease in asking rents as a lasting end to Canada's housing crisis.
The good news is that Canada has options beyond waiting. Alongside other game-changers - expanding modern methods of construction, adopting better building codes and making density legal, sustainable and viable - delivering thousands of new non-profit and community homes is one of the most effective ways to improve housing outcomes in the near term. This is especially important when weaker demand threatens to slow housing starts. If Canada wants to improve affordability by increasing supply, construction must remain high rather than rising and falling with macroeconomic conditions.
In recent years, however, soaring construction costs have made these projects extremely difficult to finance. Non-profit housing providers typically have limited equity, so new construction depends on grants and loans that are constrained by program rules or lending capacity. Projects often rely on three, four or even more funding sources - a structure industry insiders call the "funding lasagna" - each with its own limits and reporting requirements. That projects move forward under these conditions is a testament to the persistence of the people behind them. But the system should not be this complicated, and it does not have to be.
One of the main challenges is acquiring developable land and existing buildings. In the open market, these assets are priced according to their expected future value: the potential for higher rents in an existing building or market-rate revenue from new construction. But the purpose of non-profit housing is not to maximize rents or serve the high end of the market; it is to house people. Non-profit developers can therefore end up paying prices based on revenue they do not intend to collect, then relying on subsidies to close the resulting operating gap.
There is a better way. In More and Better Housing Canada's submission to the federal government ahead of its fall budget, we propose a full capital gains tax exemption for sellers of real estate when - and only when - the buyer is an accredited non-profit housing developer, municipality or Crown corporation. The exemption would encourage sellers to choose a qualified non-profit or public buyer by allowing them to increase their net proceeds even if the sale price is lower than it would be on the open market.
There is precedent for this approach. Under Canada's Ecological Gifts Program, the capital gains inclusion rate falls to zero when ecologically sensitive land is transferred to an eligible recipient. Since 1995, the program has recorded more than 2,000 donations, valued at over $1.3 billion and covering more than 252,000 hectares. In the United States, bargain-sale programs for charitable organizations apply similar logic, with Montana and Minnesota adopting complementary measures to extend their impact.
This measure alone would not reverse a decade of rapid growth in shelter costs. But it could make a meaningful difference to a sector that is essential to improving housing outcomes across Canada. With careful program design to ensure that only qualified buyers are eligible, and a five-year pilot period to test and evaluate the results, Canada could take a practical first step toward addressing the housing crisis.
