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By
Sonal Gupta, Local Journalism Initiative Reporter Canada’s National Observer
After decades of slow home-building by cities, Ottawa offered them a deal: change the rules that limit where and how homes get built and federal money would follow. But as some cities resist or reverse parts of their deals, it is unclear what counts most: passing new housing rules, keeping those rules in place or approving more homes.
The consequences have been uneven. Red Deer, Alta., and Oakville, Ont., refused Ottawa’s requirement to allow up to four homes on many residential lots and lost their housing deals entirely, forgoing millions in grants. Calgary passed, then rolled back, a similar rule and still kept its next payment. Markham, Ont., a Toronto-area suburb, rejected the four-home rule, too, but lost only part of its funding. Toronto lost about two per cent of its funding after limiting six-unit buildings to certain parts of the city.
Critics and city officials say Ottawa is enforcing the program case-by-case instead of coming up with a predictable and evenly enforced system.
Economist Mike Moffatt, the founding director of the University of Ottawa’s Missing Middle Initiative, said the Housing Accelerator Fund was meant to push cities to allow more homes on lots once reserved for single-family houses, speed up approvals and make it easier to build near transit — and for those rules to stick.
“The whole point of the housing accelerator was to incentivize municipalities to make these kinds of permanent reforms,” Moffatt said.
But the agreements also included targets for how many homes cities expected to permit. Moffatt said that has muddied the test of success: cities can point to housing numbers and argue they delivered, even when they resisted or reversed the rule changes Ottawa wanted.
In an email to Canada’s National Observer, the Canada Mortgage and Housing Corporation (CMHC) said the fund rewards local governments for cutting red tape and building homes faster. Communities submit housing action plans, with each initiative broken into milestones. Funding flows annually after a progress review.
But David Harris, the agency’s spokesperson, said when cities backtrack, there are consequences.
“CMHC also monitors communities’ progress on implementing their Action Plans and if commitments are not met or are reversed, HAF funding is at risk,” Harris said.
Harris said most of the nearly 240 communities with agreements are implementing their plans as expected, and money from reductions or cancelled agreements is made available to communities that agree to do more.
But Moffatt said Ottawa’s language has softened as debates over fourplexes and neighbourhood change became more politically difficult. “When they mean ‘red tape,’ they mean zoning,” Moffatt said. “They want to talk about zoning without using the Z-word.”
The program was heavily customized, with each city signing its own agreement, making it hard to know what penalty a city would face if it fell short.
“There’s zero consistency here,” Moffatt said.
Red Deer had been approved for $12.5 million in federal grants in March 2025. Mayor Cindy Jefferies said the city wanted to use the money for apartments, row houses, townhouses and affordable housing.
But after public meetings, the city concluded residents did not want fourplexes allowed across all residential neighbourhoods.
“The ‘blanket zoning’ piece is problematic,” Jefferies said, adding Red Deer residents weren’t concerned about fourplexes in general, particularly in places like transit routes, corner lots and major roads. “It was that you could do that anywhere you wanted.”
Jefferies said Red Deer could still deliver much of its plan without applying the rule citywide. Ottawa cancelled the agreement.
Oakville, Ont. had a similar outcome. The town had been approved for about $25 million, but federal officials ended the deal after council rejected changes that would have allowed four homes on residential properties and taller housing near Sheridan College.
But for nearby Markham, which also rejected the four-home rule, Ottawa reduced its funding by about $7 million instead of cancelling the deal.
“There had been some exceptions made for some municipalities across Canada and not others,” Jefferies said.
Markham Mayor Frank Scarpitti said the city should be judged against the rest of its agreement. The program allowed it to work with non-profits, faith groups and builders to deliver rental and affordable housing. Markham had committed to 1,640 homes and now has agreements for more than 1,900, including more than 300 affordable units, Scarpitti said.
“We delivered 99.99 per cent of the agreement,” he said.
Scarpitti said Ottawa should keep funding cities that can show progress.
“Give us another $58 million and we’ll deliver another 1,900 units for the federal government,” he said.
Toronto also faced a partial penalty. The city had already allowed up to four homes on residential lots before its federal deal — its promise to the feds included expanding permissions for six-unit buildings. After council limited those buildings to parts of the city, Toronto was docked about $10 million from its $471-million agreement. The city was contacted for an interview but did not provide one before publication.
All told, the federal data shows Ottawa ended housing deals with Tecumseh and Miramichi alongside Oakville and Red Deer. Meanwhile, in addition to Markham and Toronto, it cut funding for Charlottetown and Vaughan because they did not meet all their commitments.
But Calgary is the biggest test of how Ottawa will handle cities that back away from housing promises. The city had opened the door to more row houses and small multi-unit homes in neighbourhoods across Calgary. Then, in April, council reversed that citywide rule, restricting neighbourhood density in a move that planners say is likely to force new development to the outskirts of the already sprawling city.
Reid Hendry, Calgary’s chief housing officer, said he did not recall Ottawa saying that rule had to stay in place for Calgary to meet its deal. He said the agreement was broader than one rule: it was about adding homes now and making longer-term changes that would keep housing supply growing.
Calgary’s contract did not spell out exactly how many homes had to come from that rule, or what type they had to be, Hendry said.
Ottawa confirmed Calgary would get its third payment, worth about $65 million, and asked the city to submit a replacement plan by October before the fourth and final payment.
Hendry said Calgary has already exceeded its housing target. The city was expected to reach just over 42,000 homes by October 2027, but had already passed 63,000 by March. Calgary is using the funds to help homeowners legalize basement suites, support affordable housing projects, convert empty downtown offices into homes and pay for upgrades to power lines, stormwater, sewer and power-line work that can otherwise delay or add costs to new housing. “Projects that would have sat stagnant for some time without an injection of capital, would never have gone ahead,” Hendry said.
Moffatt said Ottawa may have made things harder for itself by putting numerical housing targets into the agreements. He said the program could have been clearer if cities were judged mainly on whether they made and kept the rule changes they promised. Instead, housing targets have given cities “ammunition” to argue they delivered enough homes, even when longer-term changes are in question or when those houses are delivered in sprawling, expensive suburbs.
Michelle Lee, Waterloo’s manager of housing, said the federal program aligned with changes the city was already pursuing. But she worried the city could still be judged on forces beyond its control: the city can change rules, add staff and speed up approvals, she said, but it cannot force developers to build when financing, interest rates and construction costs don’t add up.
Moffatt said cities that reverse promised changes during the contract period should face consequences.
“All the cities so far that have rolled it back have actually rolled it back during the contract period,” Moffatt said. “Which they can’t do, at least in theory.”
But Moffatt said the lack of a clear penalty system may be strategic. If cities knew exactly how much money they would lose for rejecting a rule, some councils might decide the penalty was worth paying.
“It’s such a badly designed, subjective program,” he added.
That uncertainty in the process also affected cities that tried to work with Ottawa.
Lesley Anderson, Saskatoon’s director of planning and development said the city had already been working for years to add more infill housing, including one- and two-unit homes in existing neighbourhoods and more housing along major roads and future bus rapid transit routes. The federal money fit with that work, but it also pushed Saskatoon further than it had planned. During negotiations, Ottawa’s requests became more specific: the city was asked to allow four homes on residential lots and taller buildings in more areas.
Anderson said the city was also limited in what it could tell the public before the agreement was announced, which delayed public engagement and made it harder to explain why the changes were being proposed. “They were building [the grant program] as they went,” Anderson said. “Having clarity from them at the beginning on what they’re actually looking for would have been a huge asset.”
CMHC did not respond to follow-up questions before publication. Sonal Gupta / Local Journalism Initiative / Canada’s National Observer.