Brief to the House of Commons Standing Committee on Finance
October 30, 2001
Introduction: Growing Needs in the 1990s Boom
Last year, with a large budgetary surplus available to the federal government, the Canadian Council on Social Development (CCSD) recommended that the priority be given to re-investment in social programs. We drew attention to the negative impacts of the large social expenditure cuts that had been imposed since 1993 to deal with the deficit; to the growing gaps and distances between Canadians which have emerged even in a period of economic recovery; and to the need for social investment to sustain both a prosperous economy and an inclusive society.
Our brief last year detailed the growth of income gaps and the persistence of high poverty rates during a period of economic recovery. We are unable to update these data since Statistics Canada’s low-income measure or LICOs (Low Income Cut-offs) will not be released until late October. However, we can report some income trends based on Statistics Canada data for 1999 calculated from tax returns.
Overall, 1999 was a very strong year for income growth, driven by the creation of more and better jobs. The median income of both husband-wife families and lone-parent families rose by 1.3% in real (after inflation) terms and incomes of single persons rose by 1.7%. (Median income is the income of a person or family at the precise midpoint of the income distribution, such that half have higher incomes, and half have lower incomes.) Employment income of husband-wife families rose by a very strong 2.7% after inflation. The 1990s thus ended on a very strong and encouraging note in terms of the well-being of average Canadians.
However, the recovery has continued to elude far too many Canadians. Statistics Canada calculates low-income rates from the tax data. Low income is defined as having an income less than half that of a comparable person or family. In plain language, being in low income means being a great deal less well-off than the average Canadian. The Table that follows provides key data on low income for 1999:
|Depth of Low Income (1999)|
|Median Income of Those in Low Income|
|Husband-Wife Families, Two Children||$16,500|
|Lone-parent Families, One Child||$11,100|
|Single (Non Family) Persons||$8,000|
|Source: Statistics Canada Small Area Data, Table 17|
As shown, the low-income rate for all persons actually increased very slightly from 1998 to 1999, to 19.07%, driven by increased low income among seniors. The sharp rise in the rate for seniors reflects the fact that their incomes did not grow in line with the general income increase, as one might expect given that seniors depend much more on public and private pensions than on earnings. The low-income rate for children fell very modestly, from 25.56% to 25.38%. This suggests that economic recovery alone, even strong economic recovery, will not close the huge income gaps between poor families with children and the rest of society.
The Table also shows the median, before-tax incomes of those in low income. It is clear that income levels for Canadians in need remain extremely low, and well short of meeting even very basic needs.
In 1999, more than one in 10 families of two adults and two children lived in low income and had median incomes of just $16,500. For purposes of comparison, note that the Market Basket Measure of poverty called for by provincial and federal ministers sets a needs-based line of between $19, 953 and $25,156, after taxes and child care expenses, for such a family living in large urban centres.
The data clearly show that many poor Canadians have incomes well below those considered acceptable by federal and provincial governments and that the situation is not improving, despite the recovery.
The Need for Social Investment
Last year, we recommended that the federal government:
sustain and expand the National Children’s Agenda and work to eliminate child poverty in Canada;
help build a national network of supports and services to assist persons with disabilities to allow their full participation in the workforce and in society;
support the incomes of the working poor by increasing the basic tax exemption to $8,000 and further expanding child benefits;
launch a national affordable-housing strategy in conjunction with the provinces, municipalities and non-government housing associations.
Unfortunately, the government chose to devote the surplus overwhelmingly to permanent income tax cuts, as opposed to these urgently needed social investments. Social spending has been stabilized at much reduced levels, and the scope for expansion in line with growing needs has been undercut by a permanent reduction to the fiscal base of the federal government. This was true even before the Canadian economy entered the current period of slow growth or even recession.
The CCSD regrets that a more truly balanced approach was not taken in the mini-Budget preceding the last election. We again emphasize that social investment is necessary to expand much-needed public programs and services, from health care to child care to accessible post-secondary education, and to provide income supports to those who have been left behind.
The strong recovery has not eliminated the need for community-based health supports for an aging population, nor for investment in child care and developmental programs for children and youth at risk. Recovery alone will not produce full inclusion for persons with disabilities, or more equal life chances for families and persons living on low incomes. Recovery alone has not built affordable housing. And the evidence to date suggests that economic recovery alone – while helping the working poor through the creation of more and better jobs – will not reverse the profoundly disturbing trend towards greater income inequality in Canada.
Those who choose to portray economic development and social development as mutually exclusive goals do so in the face of a wealth of research pointing to the opposite conclusion. Social and economic progress goes hand-in-hand. People in fairer and more inclusive societies have an enhanced capacity to be productive citizens. But social progress demands that governments play an active role in equalizing opportunities and life chances by intervening in the marketplace.
Immediate Needs and Longer Term Priorities
The CCSD continues to support a major federal role in social development that will involve significant new expenditures and a reconsideration of recent tax measures. However, we recognize that the scope for new initiatives has been undercut to a significant degree by the economic slowdown, and by the expenditures that will likely be required to deal with immediate security needs. For this reason, we have decided in this brief to focus on housing as the most urgent social investment issue. Investment in affordable housing is critically required for purposes of social development and would give a badly needed boost to a slowing economy.
Housing and social development
While economic growth has partly addressed some of the challenges to social inclusion that face Canadians, considerable gaps persist. We believe that our government has a responsibility to ensure that those who are struggling do not fall too far behind. Unfortunately, soaring rents are eclipsing much of the good done by income gains from economic growth. For many working-poor families with children, rent increases have likely wiped out all of the extra income received from federal government increases to child benefits.
About four out of every 10 Canadian households rent their housing, and the incomes of renters are typically much lower than those of the average person. Rental housing affordability has become a major issue in the 1990s, particularly in larger cities. A significant gap – indeed, a chasm – has developed between market rents and the incomes of low-income persons and families, as rents have risen sharply while the incomes of the poor have fallen or stagnated. This translates into a crisis for many particularly vulnerable groups: single parents with children; working-poor families with children; newcomers to Canada, many of whom have large families; low-income seniors; and single, low-income adults such as persons with disabilities.
Very high rents in relation to income mean that far too many families must literally choose between paying the rent or feeding the kids. In all provinces, social assistance benefits have failed to match rising rents, and the scale of rent increases has generally eclipsed the income gains of the working poor. Increases in child benefits are welcome, but they will have little impact on child well-being if they are simply swallowed up by the rent cheque.
Overcrowding and social outcomes
High and rising rents lead to severe overcrowding. While we lack definitive data, it is widely understood that more and more families are being forced to share accommodations in order to survive. Recently, the CCSD conducted focus groups with social agencies and residents in four low-income communities in the City of Toronto. We were told of two and even three large families with children sharing two-bedroom apartments; of youth “couch surfing” and sharing rooms; and of seniors living in basement rooms. Previous research by the CCSD has shown that overcrowded housing can lead to poor health and other negative outcomes for children.
Recent data suggest that the tragedy of homelessness has not receded with the economic recovery. The lack of affordable rooms and of appropriate transitional housing means that large city shelters and hostels are still full, and that people still freeze on Canadian streets in the winter for lack of a roof over their heads. More and more families with children are ending up in temporary accommodations and shelters. Homelessness is nothing less than an affront to our values, not to mention to Canada’s international human rights commitments.
Core housing need
Canada Mortgage and Housing Corporation (CMHC) considers a person or family to be in “core housing need” in terms of affordability, if their housing consumes more than 30% of before-tax income, and if suitable accommodation could not be obtained elsewhere in the community.* Suitable housing in this context would mean housing in good physical repair, with an adequate number of bedrooms, and housing which would not require the expenditure of more than 30% of before-tax income on rent, calculated with reference to average market rents in the community.
The most recent data on core housing need are for 1996, calculated from the Census. In that year, 18% of all households in Canada were in core housing need, the great majority of which were composed of renters experiencing serious affordability problems, (CMHC Research Highlights #55-2. Special Studies on 1996 Census Data: Housing Conditions in Metropolitan Areas).
CMHC has also produced research on households, which spend more than 50% of their before-tax income on rent. This statistic has been used as an indicator of severe affordability problems in large urban centres. In 1996, 13.4% of Canadian tenant households were spending at least half of their pre-tax income on rent, (CMHC Socio-Economic Series #55-7).
Rental housing crisis
In recent years, the rental situation has worsened. As noted above, families of two parents and two children living in low income in 1999 had median, before-tax incomes of just $16,500; and lone-parent families with one child living in low income had median, before-tax incomes of just $11,100. More than one in 10 (10.5%) of such two-parent families now live in low income, and for these lone-parent families, the rate rises to 36.8%. These incomes fall far short of market rents in many large cities.
CMHC provides data on rents for private units in buildings of six or more units, according to the size of the apartment. In 2000, average rents for a two-bedroom apartment – which would be needed for both of these family types and would have to be paid from after-tax income – varied across the country. However, the averages exceeded $10,000 per year in Toronto ($982 per month), Ottawa ($888 per month), and Vancouver ($892 per month). Clearly, many low-income families with children must live in crowded or sub-standard housing. Average monthly rents of bachelor apartments in 2000 actually exceeded the average monthly income of low-income, single persons in 1999 in several major cities, including Toronto.
Situation likely worsening
It is highly probable that housing affordability problems for low-income families have intensified since 1998. Virtually no new rental housing has been built, let alone affordable rental housing, and affordable units have been lost from the rental market. Since 1998, the vacancy rate in rental buildings has fallen even further in Toronto, as well as in other large cities such as Ottawa and Montreal. Between 1998 and 2000, the average rent of a two-bedroom apartment in Toronto increased by 11.2 %, to $982 per month. Rents have increased less in other centres, with the exception of those in Ottawa.
The CCSD joins with the Federation of Canadian Municipalities and the National Coalition on Housing and Homelessness in calling for a federal commitment of at least $1 Billion to a flexible capital grants program which would assist provinces and municipalities in building new, affordable rental housing. We join others in welcoming the $680 Million which has been offered over four years, but note that this is far from sufficient to produce the new units needed to house a growing population, let alone to sufficiently increase the supply of affordable housing.
The government should consider allocating a part of the large fiscal surplus expected this fiscal year to a housing capital grants fund. Such a fund could be run at arm’s length with the active involvement of sponsors of social housing projects.
The plain fact of the matter is that affordable rental housing cannot be built without a significant public subsidy. The CCSD believes it is imperative in terms of social development that the federal government again play a major role in this area, in active partnership with the provinces, municipal governments and associations sponsoring social housing projects.
Investment in affordable housing now would be particularly timely, given slowing economic growth and the threat of rising unemployment. Housing construction is labour-intensive and has higher-than-average job impacts because of the heavy use of Canadian-made materials.
* In determining core housing need, CMHC considers suitable housing to be such that each adult or cohabiting adult couple has a bedroom (with the exception of single persons in a bachelor unit), and that each child should have a bedroom unless they are of the same sex, or of different sexes and aged under five. Thus many husband-wife families with two children in fact require a three-bedroom apartment. (CMHC Research Highlights #55-1. Canadian Housing Conditions)