Although housing didn’t dominate the 2025 federal election, the Liberal platform introduced several promising initiatives to address affordability and expand supply. High up-front costs for new housing, slowing population growth and uncertainty around economic prospects — especially in light of potential Trump tariffs — are all constraining the sector.
The federal plan aims to expand financing and capital for developers building low- to middle-income housing. It proposes to reinstate a 1970s-era tax incentive for investment in multi-unit rental buildings. It also promises support for housing-related infrastructure such as water, sewer and electrical lines — the key drivers of high municipal development charges.
The most transformative proposal is a new Build Canada Homes (BCH) initiative. BCH would re-engage the federal government directly in constructing publicly owned housing, acting as a developer to build affordable homes at scale, including on public land.
The 2017 National Housing Strategy (NHS) included an aspirational goal of treating housing as a human right. In practice, however, it relied heavily on subsidizing private developers in exchange for a limited number of below-market units, failing to deliver the large-scale community or social housing needed for less affluent households.
From the 1960s to the early 1990s, the federal government supported this kind of non-market housing — co-ops and other forms of social housing — often in partnership with provinces and non-profits. BCH would return to that model, creating long-lived public assets that pay for themselves over time through rental income.
Importantly, BCH projects would charge break-even rents — just enough to cover construction, operations and maintenance. This would allow for rents below current market levels. Deeper affordability could be achieved through cross-subsidization, with lower-income households paying reduced rent offset by others paying closer to market rates.
Building these units at scale would ease pressure in the private rental market, where tight supply is keeping rents high. The key is lowering the full stack of up-front costs — land, construction, financing and development charges — which in turn reduces break-even rents. Each of these cost drivers can be influenced by federal policy, including infrastructure support and the use of public land.
On the construction side, BCH has high hopes for modular and prefabricated building techniques, shifting much of the work to factories with final assembly on-site. Ottawa could further support this by subsidizing training and developing robust supply chains.
The promise of modular construction lies in its efficiency — economies of scale and learning-by-doing can deliver major productivity gains. But this also means fewer workers per home built, which makes it essential to commit to building at sufficient scale to support job creation and maintain labour demand.
The Canadian Centre for Policy Alternatives’ Alternative Federal Budget calls for a million new homes over the next decade. Standardized designs, such as the 50 templates recently released by the Canada Mortgage and Housing Corporation, can further speed up delivery and reduce costs.
BCH should also aim for zero-carbon, energy-efficient housing. With smart planning and strong supply chains — especially for imported materials like HVAC systems — there doesn’t need to be a cost penalty for building green.
Execution matters. But BCH offers a bold and promising model for building affordable housing that the private sector has failed to deliver. The challenge now is ensuring it moves quickly and at the scale Canadians need.
Marc Lee is a senior economist with the Canadian Centre for Policy Alternatives.
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