Each year, the government invests millions of dollars to make homes affordable, but that affordability can disappear the moment the home is resold. Why?
Typically, affordable homeownership programs use government subsidies to help families purchase homes that would otherwise be out of reach. Ideally, the homes would remain affordable over time. However, if affordability conditions are tied only to the initial purchaser, the home can later be resold at full market value, ending its affordability and the subsidy’s ongoing benefit.
Ensuring that these conditions survive the transfer of property is therefore essential to keeping these homes affordable for future households.
The Legal Problem
This is where Canadian common law creates a problem.
Courts have traditionally opposed requiring a new homeowner to fulfill a promise made by a previous homeowner to do something. These are known as positive obligations and, in the affordable housing context, could include requiring the owner to occupy the home or cap the resale value at an agreed-upon amount, such as an inflation-adjusted price.
The law is much more receptive to negative restrictions, which require an owner not to do something. For example, a property may come with restrictions on subdivision. Courts have recognized that future owners can be bound by these restrictions when they provide a benefit that extends beyond the restricted property. In this example, courts have accepted that subdivision may negatively impact the value of surrounding properties or place additional strain on infrastructure.
When trying to preserve affordability, however, the goal is not to benefit another parcel of land. The goal is to keep the home affordable for future eligible purchasers. Traditional property law therefore does not provide an easy way to ensure that affordability conditions follow the home to its next owner.
A Possible Solution: Yukon’s Workaround
In 2024, Yukon took a unique approach to solving this problem: It amended its Land Titles Act, 2015 to create what is called a statutory covenant. A statutory covenant can be registered on the title of a property. Once registered, the rights and obligations authorized by the statute can be binding on every future owner, even if the obligations are “positive” in nature.
Statutory covenants have been used in other Canadian jurisdictions, but Yukon is the first to create one dedicated to affordable housing and write it directly into its land titles statute.
British Columbia achieves a similar result by combining covenants with statutory housing agreements, but Yukon’s approach brings the affordability terms and their effect on future owners together in a single provision. That provision creates the covenant, sets out the kinds of obligations it may impose on an owner, and makes those obligations binding on each new owner when the property changes hands.
A Real-World Test Case in Whitehorse
We’re already seeing statutory covenants put to work in Whitehorse by the Northern Community Land Trust Society (NCLTS). NCLTS is using a statutory covenant to build 32 condo units, with land from the Government of Yukon and construction funding from the Yukon Housing Corporation.
The project is particularly interesting because it departs from the classic community land trust model, where the community land trust retains ownership of the land and leases it to purchasers. In the Whitehorse project, instead of receiving a “leasehold interest,” purchasers receive “fee simple” condominium titles that are subject to a registered statutory covenant. This allows the homeowners to own their units outright while the covenant carries the affordability conditions forward.
Possible Cracks
Yukon’s statutory covenant is a promising way to preserve affordability in housing programs over time; however, the statute has some important gaps.
The first is enforcement. While the covenant binds future owners, it is not clear whether the land trust has any independent legal right to enforce the covenant once the units are sold. The government can reliably enforce the rules attached to the covenant, but it can also remove the covenant without the land trust’s consent.
This creates a potential weakness in the model: the covenant can follow the property, but the land trust may not be able to follow up when a future owner fails to comply. As a result, the project’s long-term affordability ultimately depends on the government’s continued commitment to enforcing the covenant.
There are other cracks in the framework too. Nothing prevents a sale that violates the affordability rules from being registered in the first place. The covenant also has no special priority, and ordinary registration priority continues to apply. Additionally, it is unclear whether the covenant would survive if a mortgage that ranks ahead of it is foreclosed on.
How to Close the Gaps
In order to address these gaps and the practical problems that arise from adopting this statutory covenant model, a legislature should make three key changes.
- Share enforcement power: It should give joint control over the covenant to a qualified community housing organization (such as NCLTS). This would mean allowing the organization to enforce the covenant alongside the government and requiring both enforcers’ consent before the covenant is ended, unless a court authorizes it under criteria spelled out by the statute.
- Protect the covenant when the property changes hands: It should prevent the registration of any sale that does not comply with the affordability criteria. It should also clearly establish how the covenant ranks against mortgages and whether it survives the enforcement of a mortgage that ranks ahead of it
- Establish clear resale rules and provide sufficient funding: It should clearly establish the rules governing resale and ensure that there is enough funding to administer the covenants.
British Columbia already provides covenant and housing-agreement powers and eligible enforcers. For other Canadian jurisdictions, the necessary reforms will be more complex and will depend on their local land-law.
Long-Term Housing Solutions Across Canada
Yukon has provided a potential roadmap for creating affordable homeownership that lasts beyond the first purchaser. The statutory covenant offers a way for affordability conditions to follow a property when ownership changes, addressing a problem that traditional property law does not easily solve.
The Balanced Supply of Housing (BSH) is a SSHRC-CMHC funded partnership grant led by Dr. Alexandra Flynn at UBC’s Peter A. Allard School of Law, focused on land use, housing financialization, and sustainable housing futures across Vancouver, Toronto, and Montreal.
