Canadian Budget Demonstrates Limits of Federal Housing Intervention

Prime Minister Mark Carney's recent federal budget proposal has drawn scrutiny for its approach to Canada's housing crisis, with critics arguing the measures fall short of addressing fundamental supply constraints while expanding federal involvement in traditionally local matters.

Immigration Policy Adjustments Show Promise

The budget builds upon previous government efforts to manage immigration levels, reducing temporary immigration targets by 25 to 32 percent depending on the year. This follows earlier cuts to permanent immigration targets from 500,000 to fewer than 395,000 annually. These measured adjustments represent a prudent approach to managing housing demand pressures.

The immigration reductions have already begun to ease rental market pressures nationally, demonstrating the effectiveness of controlled policy implementation over hasty interventions.

Federal Housing Programs Show Mixed Results

The new Build Canada Homes initiative allocates $7.28 billion over five years, primarily targeting non-market affordable housing development. However, examination of previous federal housing programs reveals concerning patterns of cost overruns and delayed delivery.

The Rapid Housing Initiative, launched between 2020-2024 with $3.84 billion in funding, has completed only 8,981 of its promised 16,058 affordable housing units according to government data. At an average cost of $240,000 per unit, these programs demonstrate the inefficiencies inherent in centralized housing delivery.

Municipal Jurisdiction Challenges

The budget proposal reveals the constitutional limitations facing federal housing policy. Municipal development charges, which have increased dramatically in cities like Toronto from several thousand dollars to $81,000 for a two-bedroom apartment, remain outside direct federal control.

While the previous Liberal commitment promised $1.5 billion to help municipalities reduce these charges, the current budget reduces this to $1.2 billion with vaguer language about substantial reductions rather than specific targets.

Zoning Reform Remains Unaddressed

The budget notably omits discussion of zoning reform, despite this being identified as a critical barrier to housing supply. Municipal governments continue to restrict residential density through single-family zoning requirements, effectively limiting new construction in established areas.

Federal attempts to influence municipal zoning through infrastructure funding conditions, such as the Housing Accelerator Fund, have shown limited effectiveness. The City of Toronto, for instance, increased development charges by 40 percent in 2024 without facing federal penalties.

Market-Based Solutions Overlooked

Housing policy experts have expressed disappointment with the budget's limited focus on private market solutions. The proposal includes GST cuts for first-time buyers, but without corresponding supply increases, such measures may simply inflate prices further through increased competition.

Previous commitments to provide tax incentives for multi-unit home construction are absent from the current budget, suggesting a retreat from market-oriented approaches in favor of direct government intervention.

Constitutional Considerations

The housing crisis highlights fundamental questions about federal versus provincial and municipal jurisdiction. While the federal government can influence immigration levels and provide funding incentives, direct housing policy remains primarily a local responsibility.

Effective housing policy requires coordination between all levels of government while respecting constitutional boundaries and local decision-making authority. The current budget's approach suggests an expansion of federal involvement that may not align with traditional governance structures.

Canada's housing shortage of approximately 2.6 million units, as identified by the Canada Mortgage and Housing Corporation, requires sustained effort across multiple policy areas. However, solutions must respect established jurisdictional frameworks while addressing the regulatory barriers that constrain new construction.