Canadian Housing Allowances Inside and Outside the Welfare System

The aim of this paper is to demonstrate that the design of welfare housing allowances of the sort used in Ontario is badly flawed, while classic rent and income conditioned (RIC) housing allowances, for people who are not on welfare, have a good design. RICs pay a percentage of the difference between actual rent (up to a maximum) and affordable rent, while welfare allowances pay actual rent up to a maximum. The paper focuses on Manitoba and Ontario. Evidence suggests that 1989 Ontario changes, including increasing the subsidy at the margin to 100 percent of rent from 80 percent, increased average allowances much more than 25 percent. Further evidence suggests that in Ontario welfare allowances either increased housing consumption or "welfare landlords" exerted monopoly power to inflate rents. Evidence indicates the Manitoba RIC did not have these effects. The paper argues that not differentiating between Toronto and the rest of Ontario results in major inequities.