Bringing Affordable, Energy-Efficient And Climate-Resilient Homes to Canadians

Submission for Pre-Budget Consultations

Our recommendations in brief

Ensure that the federal government’s Build Canada Homes initiative prioritizes the long-lasting, affordable homes that Canadians need most.
Ensure that Build Canada Homes centres on community benefits.
Ensure that Build Canada Homes centres on climate resilient and energy efficient communities with an emphasis on energy efficiency and climate resilience.
Use revenues from the industrial carbon pricing system to lift Canadians out of energy poverty and support a robust energy-efficiency industry.
Set specific goals to eliminate energy poverty in Canada.
Ramp up the Greener Homes Affordability Program to retrofit at least 100,000 homes a year.
Recapitalize the Greener Homes Loan Program.

The top priority: safe, affordable, energy-efficient homes

Our recommendations centre on two aspects of housing:

Ensuring that the Build Canada Homes project provides truly affordable housing and delivers tangible benefits to communities as it ramps up.
Ensuring that energy-efficiency initiatives are expanded to take advantage of the opportunity for nation-building, and that low-income Canadians benefit from these efforts.

Building new affordable homes

The Affordability Action Council (AAC) congratulates the federal government on its Build Canada Homes initiative. We are pleased to see Ottawa reclaiming its leadership role in delivering affordable, climate-friendly housing.

This initiative aligns with many of the council’s objectives and values, including:

Keeping public land in public hands for housing development.
A recognition that the private sector alone cannot deliver the affordable housing needed for moderate income Canadians, nor the deeply affordable housing needed to meet the needs of those with the lowest incomes.
The vast potential for a Made in Canada industrial strategy that improves housing costs, creates stable jobs and produces energy-efficient housing components.
The potential for apprenticeship and training opportunities arising from the Build Canada Homes initiative.

We believe that Build Canada Homes could be transformational in meeting the need for affordable housing. We offer the following recommendations to help the program realize its full potential.

Recommendation 1: Ensure that Build Canada Homes prioritizes the homes that Canada needs most, in other words, new homes that remain affordable and are insulated from real estate speculation.

This goal can be achieved by:

Prioritizing non-market housing providers when allocating the $10 billion in low-cost financing for affordable housing.
Prioritizing non-market development on public land.
Support the ramp-up of the non-market housing providers needed to deliver the affordable housing Canadians need.

This recommendation covers deeply affordable housing (including social housing), as well as financing cooperatives and other non-profit housing for moderate and middle-income households. The housing shortage in Canada is concentrated in social housing, cooperative housing and family-suitable rent regulated apartments that have long wait lists as this stock of homes has not increased in decades while demand has soared.

We are pleased to see the emphasis placed on housing affordability. Increasing the supply of housing by the private sector alone, however, will not deliver the depth, scale or diversity of affordable homes needed. Cooperative and not-for-profit housing developers must be central to this effort, particularly for moderate and median income households.

These non-market housing providers are an essential part of the sector. They don’t need to earn a profit and can construct homes essentially at cost. This translates into more affordable homes with lower rents compared to similar rental units in the private market. A recent study by the Cooperative Housing Federation found that coop rents in five major Canadian cities were on average 25 percent lower than “market” rents. These savings can reach as much as 30 percent in developments built on public land. Further, cooperative housing and non-profit housing are shielded from speculative market pressures and large rent increases. Rents stay relatively stable over the long term, protecting residents from the troubling practices of financialization and “reno-victions” that have become all too common across Canada.

Recommendation 2: Ensure that community benefits form the centrepiece of Build Canada Homes. This can be done by:
- Requiring community benefit agreements for major projects, These could include apprenticeship requirements, local hiring targets for equity-deserving groups, and social procurement commitments to support local and diverse businesses. Projects valued at over $5 million could specify expectations for community benefits, while projects over $50 million should require a formal community benefits agreement.
  - Ensuring that community benefit agreements include a commitment to protect existing affordable housing and prevent displacement of residents during development.
- Devising accountability mechanisms that include community representation to monitor and evaluate processes throughout project implementation.

The Build Canada Homes initiative presents a golden opportunity to ensure that the people who need affordable housing can also benefit from the jobs and economic opportunities created during development. Too often up to now, infrastructure investment has led to displacement rather than community wealth-building.

Community benefit agreements provide a policy tool that can impose tangible commitments on the ground, ensuring accountability to the communities most affected by housing development. The Affordability Action Council has previously highlighted how an ambitious retrofit strategy can create high-quality jobs for deserving groups through integrated on-the-job training, community benefit agreements and inclusive workforce development approaches. The same principles should apply to manufacturing and construction contracts awarded under the Build Canada Homes program.

Recommendation 3: Ensure that Build Canada Homes spurs the development of energy-efficient and climate-resilient communities. This can be achieved by:
- Prioritizing the development of complete communities near public transit.
- Requiring all construction and pre-fabrication activities supported through Build Canada Homes to meet the highest standards for energy efficiency and climate resilience.

The climate and affordability benefits of Build Canada Homes’ ambitious goals will be limited if projects are not carefully located to avoid sprawl and long commute times. Additionally, the program’s factory-built homes must meet the highest standards of energy efficiency to keep energy bills low, accommodate extreme temperatures and avoid future retrofit costs.

Scaling energy efficiency

Energy efficiency should be a nation-building project as the federal government looks for ways to strengthen Canadian industry while making life more affordable for low-income Canadians.

Investing in energy efficiency on a large scale has numerous advantages. It can:

Create assets that benefit the Canadian public.
Generate revenue (or savings) that stays in Canada.
Strengthen Canadian business and create jobs.
Strengthen domestic supply chains and reduce dependence on imports.

Canada needs an economic plan that matches this level of ambition and prioritizes lifting low-income Canadians out of energy poverty. Low-income households are disproportionately at risk from extreme weather events, sky-rocketing energy bills and unsafe housing conditions—all problems that can be eased by upgrading the energy efficiency of their homes.

Helping low- and middle-income Canadians get ahead

Investing in energy efficiency supports the government’s goal of holding down the cost of living and helping Canadians get ahead, as well as its commitment to making housing more affordable and creating new careers in the skilled trades.

Recommendation 4: Use revenue from the industrial carbon pricing system to lift Canadians out of energy poverty and support a robust energy-efficiency industry.

This policy should be based on the following principles:

Avoid a gap in funding and investment in energy efficiency while the new system is designed. Consistent and predictable investment is crucial to the growth and vitality of a Canadian energy-efficiency ecosystem. Whether they hit small businesses or industrial partners, disruptions to programming, funding and investment will stall growth and fuel uncertainty.

Plan for public investment to smooth out volatile revenues from the carbon-pricing system. These revenues will likely fluctuate from year to year. A public investment strategy to absorb these fluctuations will be crucial for the stability of the energy-efficiency sector.

Anchor investment criteria to goals that are broader than simply cutting greenhouse gas emissions. While energy efficiency can help reduce emissions, the benefits of upgrading low-income housing go much further. Consider investment criteria that also take into account, for example, health and safety, resilience to extreme weather events, lower energy bills and local employment.

Use carbon pricing revenue to recapitalize and revitalize existing programs and services where possible. The federal government’s current programs provide a backbone for the energy-efficiency ecosystem. We recommend using future carbon pricing revenue to continue programs that are working well, thereby reducing delays and maintaining consistency.

The government has signalled that it intends to use revenue generated by the industrial carbon pricing system to spur a variety of emission-reduction investments, including more energy-efficient homes. While details of this approach have yet to be disclosed, we offer some broad recommendations on how to encourage energy-efficiency upgrades for low-income households.

Low-income Canadians, including seniors, marginalized populations and those in rural and remote communities, are especially vulnerable to extreme weather events, unsafe housing and skyrocketing energy bills. The following recommendations specifically address the needs of these groups:

Recommendation 5: Set specific goals to eliminate energy poverty in Canada.

In line with recommendations by Efficiency Canada, we need a comprehensive national strategy to support households experiencing energy poverty, in other words, those that spend a high portion of their incomes on energy bills or cannot access adequate warmth or cooling. A strategy that specifically targets energy poverty will facilitate the adoption of policies and allocation of resources where they are needed most.

This strategy must include:

A clear, national definition of energy poverty.
Targets that track progress beyond a single metric so that they capture the various dimensions of energy poverty, such as energy costs relative to income, indoor housing conditions and health impacts.
Systems to comprehensively measure progress towards the targets.

Recommendation 6: Ramp up the Greener Homes Affordability Program to retrofit 100,000 homes each year.

The 2024 budget allocated $800 million over five years for a low-to-median income Greener Homes Affordability Program. We welcome this initiative, designed to address key barriers facing low-income Canadians in accessing efficiency upgrades.

The Affordability Action Council’s research recommends retrofitting at least 100,000 low-income homes per year as a small proportion of the overall targets set by the federal Green Building Strategy. Based on evidence from comparable initiatives, such as the US Weatherization program (~$11,000 per home), we recommend scaling up investment to achieve this retrofit volume target. Only by doing so can we adequately address the pressing need of low-income households to climb out of energy poverty and live in safe, comfortable housing.

We also recommend a commitment to move from this initial program to consistent support in order to send a strong signal to Canadian businesses that they can count on an expanding domestic market for energy-efficient products.

Recommendation 7: Recapitalize the Greener Homes Loan Program

The Greener Homes Loan Program was launched in 2021 to provide interest-free financing for upgrades such as heat pumps, insulation, windows, and solar panels for middle-income Canadians. An additional $600 million was allocated to the program in 2024.

Yet the program could face a funding shortfall before the end of 2025 due to unexpectedly heavy demand for energy efficient upgrades. We are concerned that the abrupt cancellation of programs due to funding booms and busts risks breaking the trust of customers and destroying contractor businesses that provide careers in the skilled trades. Budget 2025 should immediately recapitalize the Greener Homes Loan Program to avoid any such disruption.

The Greener Homes Affordability Program mentioned in recommendation 6 is specifically designed to meet the needs of low-income Canadians and should be the priority of any energy efficiency project. However, it is also crucial to send a strong signal to Canadian business that the government is willing to invest on a significant scale to ramp up this nation-building project across the economy. The recapitalization of the Greener Homes Loan Program would focus on middle-income Canadians with the aim of providing a more comprehensive package of offerings that would create a level of demand for energy-efficient products and services sufficient to develop a strong industrial base.

Loans typically don’t work for low-income Canadians because they require a strong credit history. Many low-income households are already burdened with significant debt. Traditional reimbursement grant-based programs also require up-front payments that are not accessible to low-income Canadians. For middle-income Canadians however, loans and reimbursable grants can be an important part of financial planning while also providing an opportunity to create public assets on the government ledger.