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  • Writer's pictureCam Anderson

Addressing Alberta's Housing Insecurity

Updated: Sep 16, 2021

Allocating some of the $18.5 billion held in the Alberta Heritage Savings Trust Fund (AHSTF) to support the health issues caused by lack of adequate housing is a great idea.

The idea proposed by Dr. John Rook would start a permanent fund of $5 Billion called the Affordable Housing Endowment Fund (AHEF).

The fund proposed is to build and support new affordable housing, with each unit estimated to cost $200 K to build. Jobs are created building housing for those who need it.

The discussion that follows is about ensuring this is sustainable, and about some options to enhance this program.

Available funding from the Heritage fund per year:

An annual spend of income and capital gains from the $5 billion AHEF should generate 6.7%[i] on average after inflation. This return will fluctuate with the market over each year, but on average, it should allow the construction and support fund of $335 Million per year.

In years where the return on the $5 Billion of the Heritage funds is not as high, less would be used, and when higher, more could be used.

Making sustainable

Projecting revenues and costs can inform the overall carrying capacity of the AHEF.

Revenues: To help support the cost of the housing, affordable rents would be collected. Based on an example in Vancouver, an affordable housing project might collect $9,630 per year in rent per unit.[ii]

Costs: Typical housing costs (excluding mortgages) including property taxes, utilities, insurance and telecom come to $7,740 per year.[iii] Maintenance is typically 4% of capital costs over a year, which adds $8,000 to make roughly $15,740 in ongoing yearly costs.

Sustainable funds support the net costs per year for each unit.

  • Revenue of $9,630 minus costs of $15,740 equals a per-unit shortfall of $6,110 per year.

  • To sustain that shortfall requires a supporting fund of twenty-five times the size, or 25 x $6,110 = $152,750 per unit.

The number of units sustainably supported by the $5 billion is the annual income of $335 million divided by $152,750, which equals 950 new housing units. Very nice!

Strategies for more

Could the $5 billion generate even more housing?

The Alberta Affordable Housing Review Panel Report[iv] states the AB government does not want to own more public housing, preferring to act as a coordinator/ administrator. Thus, building more homes with the AB heritage fund might be better positioned instead by renovating the current inventory to sell to the private sector while subsidizing the renters according to need.

Alternative Recommendation

Use the $5 Billion first to renovate existing stock, then subsidize rents each year.

Additionally, the AB Government should borrow another $20 Billion to build an AEHF that can fully subsidize the families needing housing assistance.

Why it matters:

Statistics Canada reports 4.8 million[v] Canadians live below the poverty line. The most challenging aspect of poverty is the effect it can have on mental health. The poor suffer constant stress and anxiety about how they're going to pay their bills and how they're going to put food on the table.

'Rent is the first priority because things get a lot more complicated without a roof over your head'[vi] explains Elaine Power, an associate professor at Queen's University.

Tackling the rental housing crisis is of high value in reducing interconnected societal poverty issues.

Address the costs of renovations

Approximately 43,500 Alberta households were housed in regulated social housing units in 2019. The Government of Alberta owns almost half of the subsidized housing stock in Alberta, approximated as 22K homes.[vii]

The current AB public housing stock of 22 K homes needs renovations. Assuming a renovation cost of $75K per unit, the total renovation needs are 22 K x $75K = $1.65 Billion

By applying $330 M per year from the Heritage fund, the government can upgrade the complete housing stock after five years. The AB government could sell completed units each year – provided they remain in the supply for public housing. One way would be to provide subsidies for lower-income households to meet the required market rents after the renovations are completed.

These gains could reduce the amount borrowed from the Heritage Fund, or find other uses, like rent subsidies.

Costs for rental subsidies

If every household acquired financial assistance to bring their housing costs to be less than 30% of monthly income, I estimate that would mean each household being subsidized with $6,400 per year.[viii]

After five years, with the housing stock rejuvenated and perhaps sold off, the fund's annual $300 M could subsidize rents for $300 M /$ 6,400 = 46,875 homes! An achievement to celebrate!

How much housing assistance is needed?

About 200K households need assistance. Currently, 164K households have a core housing need.[ix] Unaddressed, the growth of housing needs may be 32% over the next ten years, to 216K households.

To sustainably finance $6,400 per year for the approximately 200K households requires a fund of 25 times the annual spend. If the annual spend is 200K x $6,400 = $1.28 Billion, the sustaining fund required is $32 Billion.

Creating a sustaining fund of $32 Billion is a vast challenge but can be resolved given time and political commitment. The following shows one way forward.

Time for bold action

Per the report[x]:

"Bold action emerged as an important principle during engagement activities. Interest groups strongly encouraged the Panel to implement transformative ideas, rather than small, incremental changes. Key stakeholders stated that they were ready to see bold, innovative, and sweeping changes to help transform the delivery of affordable housing in Alberta."

Consider having the AB government borrow $20 Billion to fund the delivery of affordable housing. This would be bold!

To put this in perspective, in Jan 2021, the provincial government's debt will increase significantly as the deficit for this year is expected to be more than $18.2 billion.[xi]

With the AB government adding $18.2 Billion to spend with nothing but our promise as security, it seems to me at least that AB could easily raise another $20 Billion more that is financially liquid and backed by investments.

How borrowing could help

At market rates of 6.7% earnings, the borrowed money, even after paying 2.3% interest on the $20 B, rises to approximately $80 B after 21 years[xii].

Proposed use of the $80 B:

1) Payback the $5 Billion AB Heritage fund, with $30 B (i.e. while kicking off the AHEF, the AHSTF earned over 8% over the 21 years in use. This is why the AHSTF should endow the AHEF!)

2) Use the remaining $50 B as follows:

a. Use $20 B to pay back the borrow $20B.

b. Use $15 B to support more with approx. $15 B x 6.7 % = $1 B per year. At $6,400 per family, $1 B now supports 156 K families!

c. Use $15 B to double perpetually to $30 B every 11 years. At each doubling:

i. Use $15 B more to generate support with $ 1 B more per year, helping possibly an added 156 K families, or addressing other anti-poverty needs.

ii. Use $15 B to repeat this cycle in step (c).

Repeatedly increasing sustained benefits

Based on adding $20 B every 11 years to support housing and to help alleviate poverty generally, the AB heritage fund is being used and augmented as always intended.


This blog has attempted a fifty-thousand-foot level view of some options to alleviate poverty, especially concerning and starting with housing subsidies in the province of Alberta, Canada.

The next steps would be to choose the desired approach, tighten up the analysis with much more rigour, and focus on a request for the Alberta government.

Footnotes are available here:

Photo by Igor Kyryliuk on Unsplash

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