Is It The Private Sector’s Job To Build Affordable Housing?

Toronto Politics

10 minute read

November 20, 2023

I’ll be honest: I wasn’t sure how to begin today’s blog post.

This topic has been in the queue for quite some time, and while I knew that I would write it eventually, I didn’t know the shape it would take.

I guess I still don’t…

Do I start with the conclusion at the onset and work backward?

“It’s not the job of the private sector to build affordable housing.”

I suppose I could, but this is kind of a grey area, since the private sector could build affordable housing, so long as it was paid for by the public sector.

We don’t want to get lost in technicalities at the onset.

So maybe we don’t start with the conclusion, but rather start with the problem?

“There’s not enough affordable housing in Toronto.”

Okay, but we talk about this all the time.  It’s nothing new.

And is the lack of affordable housing the problem, or is it merely the symptom of a larger problem, such as:

“Housing is too expensive in Toronto.”

Perhaps that’s the bigger problem and the fact that there’s not enough affordable housing stems from that.

Then again, in order to examine the respective roles of the private sector and the public sector in providing affordable housing, shouldn’t we first define “affordable housing?”

Affordable how?  According to what metric?  And affordable to whom?

Discussing the definition of affordable housing is a blog topic unto itself.

As you can tell from today’s title, my goal is to discuss the role that the private sector should have in the building of not only affordable housing but housing in general.

Over the last year, I have noticed an increasing number of newspaper articles, opinion pieces, or quotes on social media that seem to “blame” the private sector for the housing crisis.

Some blame the private sector for not building affordable housing.

Others blame the private sector for seeking profit.

I remain very confused by the latter, and at the risk of sounding like an 89-year-old man who yells at passing clouds, dare I say that all private entities operate in search of profit?

Ah, but how much profit?

The grocery industry came under attack this year as politicians lined up to blame inflation and the cost of food on “greedy grocers.”  That gave us the beautifully ironic term “excess profits,” which NDP leader, Jagmeet Singh, has uttered nine-thousand-seven-hundred-eighty-one times in 2023.

Again, I would ask: who defines “excess?”

And why limit the “excess” to just grocers?  What about oil and gas companies, banks, private healthcare and medical, and the entirety of the automotive industry?

Is a 10% profit enough?  What about 15%?  What about 20%?  What about 300%?

What if a gourmet cupcake startup in Leslieville is turning a 9,000% profit?  Should we step in and regulate the price of their cupcakes?

I’m of the mindset that so long as the government allows the telecommunications industry to operate as an anti-competitive entity that charges among the highest prices on the entire planet, then the government should be the last one to define “excess profit.”

And while you might think that I’m straying off topic at this point, let me stop here and point out that I’m taking this discussion exactly where it needs to go.

I want you to picture this scenario:

You go out to a very nice restaurant and drink, eat, and be merry.  After two hours, the bill arrives and it shows a balance of $200.00.  The server comes to your table with the credit card machine, and you politely state, “I know that the cost of the food, labour, rent, and operating expenses only amounted to $105.00, so that’s what I’m going to pay you.”

That would be uncalled for, right?

And while you might get the picture, and another example isn’t necessary, what would you think about walking into Lexus and purchasing a $65,000 car, only to argue that you’d like to pay them $50,000 because you don’t believe they should make a profit?

I continue to read sentiments that the “problem” in our housing market is that developers operate in search of profits and I don’t understand the confusion.

Do they still teach economics in high school?

Do people understand the difference between and respective roles of the private sector and the public sector?

I bookmarked this article in the summer:

“If Developers Won’t Build Affordable Housing, The City Of Toronto Has To”
Christopher Hume
August 25th, 2023

For those that don’t recognize the name, Christopher Hume wrote for the Toronto Star for almost four decades!

When I got into the business, I regularly read his “Condo Critic” column where he reviewed new developments and I’ve always enjoyed his work.

The article above appeared on, and for the life of me, I can’t say with certainty which tone Mr. Hume is taking.

Read this excerpt:

By now it should be clear, the development industry is not going to solve the country’s housing crisis. It has no interest in building anything that doesn’t make a profit. Only government can deliver the social and affordable housing so desperately needed across Canada, let alone Toronto and the GTA.

I’ve read this a dozen times and I don’t know if Mr. Hume is being accusatory or explanatory.

Try reading this from the tone of somebody who believes it is the job of the development industry to build affordable housing.

Then, read this from the tone of somebody who is explaining to the uneducated that it’s not the role of the development industry to “solve the country’s housing crisis.”

At worst, it brings up the conversation.

Where Mr. Hume loses me is his discussion of how other municipalities across the world deal with affordable housing.

But as other cities have demonstrated, successful housing policies don’t necessarily depend on the private sector. In this regard the international poster city is Helsinki. For decades, the Finnish capital has had an aggressive policy of buying land within its boundaries at every opportunity. Though it will shock most Canadians, the City of Helsinki owns fully 70% of its land area and operates its own construction company. This gives it control over how that land is used and developed. Little wonder, then, that the city manages to build more than 7,000 living units annually, 25% of them social housing. This and an internationally lauded program called Housing First have enabled Helsinki to all but eliminate homelessness completely, the only European Union city to do so.

That sounds absolutely wonderful!

I take no issue with what is written, nor do I question the facts herein.

But how Helsinki and others got to this point is explained in a subsequent paragraph:

Housing has been a civic priority in Vienna since the 1920s. In the aftermath of World War I, the collapse of the Habsburg dynasty and the advent of universal suffrage, the city launched a remarkably successful program to provide high-quality housing affordable for low-income inhabitants. A century later, a third of all rental units in Vienna are owned by the city. Even more remarkable, 60% of Viennese residents live in housing that is built, sponsored or managed by the city.


A century ago.

We are comparing the situation (plight?) of our housing market here in Toronto to areas across the world that began their housing efforts a century ago.

It makes no sense to do this.  It’s completely unproductive and tantamount to wishing and dreaming.

Where the City of Toronto finds itself right now, financially and logically, makes a housing plan like that of Helsinki or Vienna absolutely impossible.

Consider this article:

“Olivia Chow’s Wrong Turn On Boosting Housing In Toronto”
The Globe & Mail
November 10th, 2023

From the article:

Consider affordability first. Building tens of thousands of new low-cost housing units will cost a fortune. The figure $36-billion is being kicked around. That is more than twice what city hall will spend this year on everything, from policing to transit to road work.

Toronto simply doesn’t have that kind of money. It is already in the worst financial crisis since amalgamation in 1998.

It faces a shortfall of $1.5-billion on its operating budget – and isn’t allowed to just borrow the money, as higher levels of government do. Look ahead 10 years and the projected shortfall grows to $46.5-billion, a staggering figure for a government with no income or sales tax.


So why then are we talking about Helsinki and Vienna?

If grasping at false hope was an Olympic sport, I think that many Toronto columnists and housing critics would be world champions.

Later on in the article, we read:

The mayor argues that private developers have not been building low-cost housing because they are driven by profit and there just isn’t enough in it for them. So the city has to step in and become a developer itself, taking a “people-centred” approach.

This is the point I’m trying to get at.

Developers aren’t building housing, why?  Because they are driven by profit.

Is this a surprise to anybody?

Is this, in any way, shape, or form, wrong?

If you read Mr. Hume’s article above in a cynical, accusatory tone, it would say, “…the development industry has no interest in building anything that doesn’t make a profit!”

Add the exclamation mark for impact’s sake!

But are there people out there who really, truly believe that developers should be building to break-even, or worse, at a loss?

I’m sure you can provide me with examples of non-profits or developers who set aside a certain amount of time, money, or effort to “give back” in the form of affordable housing.  But developers are not, as a core business function, seeking to provide the public with a benefit while experiencing a loss.

I shudder to think just how many out-of-touch, sign-waving, online-commenting, eagerly-protesting individuals think otherwise.

So if not private developers, then who?

Another article I bookmarked back in the summer might answer this question:

“The Federal Government Used To Build Social Housing. Then It Stopped. How Is That Going?”
CBC News
August 27th, 2023

From the article:

Many agree we’re in the middle of a national housing crisis. So how did we get here?

It depends on who you ask, but for many housing experts, affordability advocates and municipal officials, the answer lies in part with a policy shift consecutive federal governments joined decades ago. A shift that some argue provides clues on how to fix the current housing conundrum.

Despite the prime minister’s assertion earlier this month that housing isn’t primarily a federal responsibility, it hasn’t always been that way.

Canada had long provided subsidized housing for people who couldn’t afford to pay market value: for workers and returning veterans after the Second World War, for example, and in the 1970s and early 80s as pressure mounted for Ottawa to intervene during a series of recessions.

In the early to mid-1990s, back-to-back governments of different political stripes — first the Conservative government under Brian Mulroney and then Jean Chretien’s Liberals — began pulling back from the business of affordable housing.

Facing big deficits and with neoliberalism taking hold globally, Ottawa reduced spending on housing, cut the federal co-operative housing program (one that saw the construction of nearly 60,000 homes) and eventually pulled the plug on building any new affordable housing units altogether.

Like the author of this article, I was both surprised and disappointed in the summer to hear Prime Minister Justin Trudeau punt on the topic of housing.

To see him shrug off the housing crisis and seek to lay blame on municipalities and provinces was shocking, but at the same time, expected.

The federal government has the most money.  On this, I don’t think we disagree.

Every municipality in Ontario falls under the same legislation that only allows long-term debt for capital purposes and prohibits municipalities from borrowing from operations, so the City of Toronto’s hands are tied in many ways.

And the City of Toronto cannot introduce a sales tax, as Mayor Olivia Chow has proposed.

So in the end, there’s only so much the municipalities themselves can do.

Do we believe that the City of Toronto is equipped to go into the development business?

I don’t.

But in lieu of a federal housing plan, what other options exist for the municipalities, other than standing by and doing nothing?

Here’s yet another uninspiring headline:

“At Least $1 Trillion Needed To Achieve Housing Affordability, CMHC Says”
Financial Post
October 3rd, 2023

But a quote within the article takes us right back to where we started:

“The amount of money is so enormous that we really need the private sector involved,” deputy chief economist Aled ab Iorwerth said. “The government can’t do it alone.”

And how about this article, which is now very stale-dated, but shows us that the trillion-dollar price tag noted above was brought to our attention one-and-a-half years ago:

“Canada Needs 5.8 Million New Homes By 2030 To Tackle Affordability Crisis, CMHC Warns”
CBC News
June 23rd, 2022

From the article:

The Canada Mortgage and Housing Corp. (CMHC) says 3.5 million more homes need to be built by 2030 to reach affordability.

The agency released a report Thursday explaining the need for a different approach to the housing supply shortage at a time of rising demand and affordability concerns.

“Increasing supply will be difficult. Critically, increasing supply takes time because the time to construct is significant, but so is the time to progress through government approval processes,” the report reads. “This delay means that we must act today to achieve affordability by 2030.”

If current rates of new construction continue, CMHC said the country’s housing stock is expected to increase by 2.3 million units by 2030, reaching close to 19 million units total. But in order to achieve affordability for all Canadians, the agency said an additional 3.5 million homes are needed.

Let me be cynical, just for a moment.  And for a change…

The last paragraph reads, “…in order to achieve affordability for all Canadians…”


As in…all of them?  That sounds like an impossible task, right?

But it depends on how we choose to view and ultimately define “affordability.”

We’re not talking about two low-income workers being able to afford a detached home in the central core, but rather I believe that “affordability” simply means that every Canadian can afford to live somewhere, whether owning or renting, based on their income, without going into extreme debt.

Virtually everybody who purchases a home goes into debt, but when I say “extreme debt” I mean that somebody who makes $50,000 per year should not be expected to rent a property for $3,000 per month.

Now, this person might choose to live outside the city in a more affordable area and commute to work, or might choose to take on a roommate, but I think that “affordable” has to mean that a realistic, open-minded, flexible individual can afford a home (either purchase or rent, house or condo) without taking out a line of credit, or carrying a balance on their VISA.

We need to be careful that “affordable” doesn’t mean two 25-year-old Instagram influencers can afford a red-brick Georgian in Rosedale, which is the definition of “affordable” that many hang onto.

But true “affordability” should remain a goal, no matter the market, the political party in power, or the economic climate.

So how do we get there?

It’s not by expecting the private sector to build housing at a loss, or break even, or an “acceptable” level of profit.

And just for good measure, for the umpteenth time, can we talk about the government’s role in why it’s expensive for developers to build?

There is HST charged on new construction.  And this isn’t 13% on a new $20 water bottle we’re talking about.  Housing is likely the most expensive purchase out there.

Then there are City of Toronto development charges which can run as much as $137,040 for a new unit of housing, and which were increased substantially in 2023, despite us being in a housing crisis to begin with.

At last, we have land transfer tax, which is paid to both the City of Toronto and the provincial government.

So when all is said and done, how much of the cost of developing a new unit of housing is going to the three levels of government in some capacity?

20%?  25%?  30%?


And housing is not “affordable?”


And we’re blaming developers for not building “affordable” housing?


Back out all taxes, fees, and levies associated with building new housing, and do you know what the result would be?

More affordable housing.

Who’s to say if it’s “affordable” yet, but it would certainly be more affordable than before.

Now, I’m not going to suggest that the government should eliminate all these taxes, since the City of Toronto would be more broke than before.

But I am going to suggest that critics of developers, especially those who call them “greedy,” should gain perspective.

New housing is expensive because of the cost to acquire the land, the cost of materials, the cost of labour, and taxes included by all three levels of government.  Oh – and because the developer wants to make a profit.

If we wanted new housing to be less expensive, then something on that list would have to give.

And just for the record – nobody is suggesting that a developer from the private sector should construct dedicated, purpose-built, low-cost, low-rent apartments, ie. “affordable housing,” aka low-income housing, social housing, subsidized housing et al, right?  Because another synonym for this is “government housing,” but the government is the public sector, and thus this isn’t the job of the private sector.

Or is it?

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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  1. Appraiser

    at 8:35 am

    The solution to the housing crisis involves expanding the role of government at all levels while working alongside the private sector to get housing built.

  2. Bull

    at 9:01 am

    I cringe when I hear Olivia Chow talk about the private sector and housing. Sometimes I think she must not know how the public and private sectors work but then I remember that she’s an experienced politician and knows EXACTLY how it works!! She just doesn’t care. NDP’er through and through. Toronto’s answer to Jagmeet Singh. Expect corporations to carry the public sector’s load while public money is spent on nonsense. Remember this is a person who lived in subsidized housing for years and years with Jack Layton even though they could afford market rent!

    1. Steve

      at 1:08 pm

      Person who is pro affordable housing lived in affordable housing (a co-op with intentionally mixed income levels). How outrageous.

      There are so many valid things to knock Chow on but this one isn’t the gotcha you think it is…

  3. Marina

    at 9:02 am

    I don’t know whose job it should be to build “affordable housing”, but it is absolutely the job of the government to influence and corral the housing market. You can’t have a government that levies massive taxes and fees, lowers interest rates, AND brings in 500K people a year, and then shrugs and says “it’s not my job to fix it”.

  4. Sirgruper

    at 9:31 am

    Why not ban or heavily tax renovations. Every time you take a dated or run down house, condo or apartment and make it beautiful and desirable, you reduce affordability. A 25% Lowes and Home Depot tax is needed in the City of Toronto.
    David, did I get the tone right;)

  5. Nick

    at 11:25 am

    To the question of the title, no. Their job is to make money. Do I wish they’d do some altruistic building yes but I don’t think they should be obligated to.

    As for the rest, yes I do think the Private sector can help by bidding on contracts that the government puts out to tender.

    My bigger concern is the mix of housing they’re building. With so many studios and one bedrooms being built by the private sector why aren’t all social units being built as two or three? We are spending the money.

    1. Dickson

      at 12:21 pm

      Because the more bedrooms there are in the package, the fewer units there will be for the same total area. This is true regardless of whether the builder is public or private. If we are going to be spending the money, from the perspective of a social service, we should maximize the number of units to serve as many individuals as possible.

      It also ties into what David said:

      “We need to be careful that “affordable” doesn’t mean two 25-year-old Instagram influencers can afford a red-brick Georgian in Rosedale, which is the definition of “affordable” that many hang onto.”

      We also need to be careful that “adequate” housing doesn’t mean that a family of 3 “needs” a 2-bed-1-bath, or that a family of 4 “needs” a 3-bed-2-bath, which is the definition of “adequate” that many Canadians who have never lived anywhere else hang onto. I’m saying this as someone who was raised in a family of 3 living in a 400-sqft bachelor unit from a Hong Kong public housing estate.

  6. Serge

    at 12:33 pm

    David, you raised a very good point mentioning that all real public housing systems started 50 years before Toronto’s. Same with the TTC. It started, when NY system peaked out and went down in terms of ridership. Too late!
    Now, TTC ridership slightly went up in 2000s, but even before pandemics it started sliding down, let’s ignore the current plight. So, why invest and expand when the system is going down?
    Same with housing. Somehow everybody talks about “immigrants” and never links it to real Toronto (proper) population. The latest census (2016-2021 or something) demonstrates growth only 50K over 5 years. 10K a year! There was a map demonstrating depopulation in most wards, except downtown. Toronto never touched 3 million and probably will not. So for whom to expand affordable housing?
    May be, for international students?
    And third point, you never mentioned that the current boom in residential housing vs condos is based on Feds giving practically free money (there is a fund for this) to private developers to build residential towers. That is like co-ops, just owned privately. It is already happening!

    1. cyber

      at 7:21 am

      Let’s not conflate correlation and causation. Low growth in Toronto’s population does not mean people don’t want to live here, but that they can’t afford to. There’s just not enough new housing being built relative to the interest in living here.

      If demand for life in Toronto was stagnant, we would not be seeing >10% annual increases in rental prices…

      Depopulation in most wards is just the yellow belt, single family homes owned by boomers whose adult kids are finally moving out while they stay put. Those adult kids have (or want) jobs in the city and absolutely want to live in Toronto, but can’t afford to and are now in Barrie and Pickering and stuck on the 401 or GO train daily. Hence, “depopulation”.

      1. Serge

        at 12:45 pm

        You are right on many fronts, eg yellow belt, etc. However, I never said the low growth is the result of people not wanting to live in TO. I did not not suggested any causes, just indicated the reality which affects eg city planners (not developers). The causes could be many (eg boomers croaking, millenials peaking and nesting), but we do not know. We do not have numbers. Numbers are provided by the industry and gov selectively. If there were 10% annual growth over last 5 years, 1bed would have cost over 3500 (it is a Frankennumber, as they use condo prices, and condos are around 30% of the rentals, and used mostly short-term by transients and students).
        One also need to take into account that this an all-American phenomenon, as all large metropolises have been losing population last 5-10 years. Reasons are many, but – should city planners and budget people to budget and build 500 000 cheap units to attract those adult kids closer to their parents? Huh.

        Anyways, as I said and below noted, the process of Feds giving money to developers to build more rentals already started, and that is in a way answer to David: why would private corps do it? Because they will be given public money to do it. And the result will be theirs. Off the gov hands.

        A similar thing has been done long ago, in urban revitalization process, to attract adult kids to downtown. It is called St.James town.

  7. Vancouver Keith

    at 4:39 pm

    Instead of throwing stones at potential solutions, maybe we should give them a shot. We were building 25,000 unit of co op housing thirty years ago – not a hundred. 4.7% of our housing stock is public, far below the level of most western nations. If that’s the salient difference, maybe an all out program to address it should be tried. Building a flood of housing at current land and building costs will financially benefit the few, while socializing compromised livability and passing infrastructure costs on to the many.

    Maybe it’s Airbnb. Try an overall limit on units, with a meaningful license fee, and meaningful enforcement. Maybe more long term rental housing stock won’t make as many tenants behave as badly as they do. Maybe it’s foreign capital. Singapore taxes foreign buyers at 61%. If we tried it, we would find out pretty quick. As for cutting costs and hassles for developers, you’re assuming that would be passed on to the consumer. That’s a giant assumption, especially in a country where developers sit on land for as long as they do.

    Maybe the level of immigration is too high. Maybe we should cut it to 100,000 per year for three years, and watch what happens. Maybe when the Canadian federation of independent business demand high immigration, and ever larger numbers of temporary foreign workers, we should look at the impact on the cost of housing, and on wages and salaries in this country and ask ourselves what kind of bargain we’re making.

    Big problems, require big solutions that are going to cause some set of society a certain amount of pain. The longer you delay the day of reckoning, the more painful it will be. Government ignored the problem, and fueled the fire. They alone have the power of solution, it lies with them. But who will take the political risk of being out of office for a very long time to make such fundamental change. That kind of leadership is rare.

  8. Appraiser

    at 6:31 pm

    Billions to be announced for housing construction in federal fiscal update tomorrow. Good news help is on the way: “New measures will include $15 billion for 10-year loans for new rental housing construction, a $1-billion fund dedicated to getting more affordable housing built, and new mortgage rules for lenders dealing with homeowners at risk…”

  9. DAF

    at 8:58 pm

    This sentence resonated for me:
    We need to be careful that “affordable” doesn’t mean two 25-year-old Instagram influencers can afford a red-brick Georgian in Rosedale, which is the definition of “affordable” that many hang onto.
    There is affordable housing but just not where my first-time buyers want to be! And therefore they whine about affordability issues, dead set against moving a bit north of the desirable West End locations because there aren’t enough cafés within walking distance! Don’t get me started on a rant because it could be worse than a Fleming rant!

    1. JL

      at 9:24 am

      It was already at 2.8% back in June… and then August (4.0%) and September (3.8%) happened. We may want at least a few consecutive months worth of data to establish a definitive trend here before returning to the free money era. Also, I have a feeling the jumps (both up and down) are heavily skewed by the fuel cost component.


        at 9:31 am

        NO you are wrong. Rates will be coming down IMMEDIATELY. Governer Tiff Macklem has a speech scheduled for tomorrow in Saint John titled “The Cost of High Interest Rates” where it is very widely expected he will cut rates. Experts are saying they will be cut back to 0.5% to gin up the economy which is falling very very badly right now because of these insanely high rates. Stay tuned for rate cuts tomorrow you heard it here first!!!

    2. Bryan

      at 12:59 pm

      The funny thing is, nothing has really changed except that the contribution that interest rate hikes last fall are having on CPI (which absolutely inexplicably includes mortgage interest) are starting to fall away. So far, the 2.25% increase from June to September last year has fallen out of the yearly calculation. Another 1.25% will fall out by January and then another 0.5% by the end of the summer. When mortgage interest rates were hovering in the 1-1.5% range, this is a massive increase.

      “The largest contributors to the year-over-year CPI increase continued to be mortgage interest cost, food purchased from stores and rent.” Two of these things are directly tied to interest rates. When these fall off, so will inflation. Rates will start to fall in the spring or summer.

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