Rethinking the Canada Housing Benefit for Homelessness Prevention

Homelessness is rising rapidly across Canada. With the National Housing Strategy approaching its scheduled end in 2027-28, governments have an important opportunity to reconsider how housing assistance can prevent homelessness.

The Canadian Alliance to End Homelessness (CAEH) commissioned Blueprint to examine a complex policy question: could the Canada Housing Benefit be redesigned to reach households at greatest risk of homelessness and achieve greater impact from public investment?

Answering that question required connecting two areas of policy analysis that are often considered separately: housing and homelessness policy and income-benefit design. Blueprint combined housing-sector knowledge with rigorous policy analysis, building on earlier research into the Homelessness Income Cut-Off (HICO), developed by researchers at the University of Calgary. We translated the concept into practical benefit designs that could be modelled and compared at a national scale.

Most housing benefits judge need by the share of household income spent on housing. But homelessness risk can arise when a household does not have enough money left to pay rent after covering food and other basic needs. A rent-to-income ratio can conceal this vulnerability: a lower-income household may be unable to cover both rent and essential expenses, even when a higher-income household (spending the same share of its income) remains financially stable. For homelessness prevention, the key question may therefore be whether households have enough income to cover their basic needs and still pay their rent.

Blueprint developed and tested an alternative approach that targets assistance based on residual income: what households have left after paying their housing costs. Using Statistics Canada’s Social Policy Simulation Database and Model, we compared representative HICO-based and housing-affordability-based benefit designs. We assessed their effectiveness, cost, distribution of benefits, and potential behavioural incentives to understand the options and trade-offs involved.

The analysis showed that design choices can dramatically change the impact of the same level of public investment. At a similar estimated annual cost of approximately $7.6 billion, the selected HICO-based design would lift an estimated 769,533 renter households above the homelessness threshold, compared with 278,149 under the affordability-based design. It would achieve this at approximately one-third of the cost per household lifted above the threshold.

The HICO-based approach was projected to reduce active homelessness by more than 60% within two years. These projections are illustrative and depend on the assumptions set out in the report, but they demonstrate the potential scale of impact when benefit design is explicitly connected to homelessness prevention.

CAEH has used this evidence to propose a transformed Canada Housing Benefit anchored in the HICO as part of a broader housing safety net, alongside continued investment in affordable and supportive housing.

This research demonstrates that effective housing policy depends on more than the size of an investment. It depends on how programs are designed, who they reach, and how different policy choices translate into outcomes. By bringing together housing-sector knowledge together with rigorous analysis, advanced benefit modelling, and homelessness-system data, Blueprint provided a practical way to assess options and trade-offs before governments make investment decisions. The work identifies how housing assistance could be targeted more effectively to prevent homelessness at scale and maximize public value.

Reports

·         A Residual Income Approach: Rethinking the Canada Housing Benefit for Homelessness Prevention (2026)