Commentary
By Grady Munro and Austin Thompson

The Carney government has faced widespread backlash after announcing plans to partner with the British Columbia government to purchase 2,200 vacant condos with taxpayer dollars and convert them into “affordable” housing. The criticism is well earned. The program may overpay for undesirable homes, bail out condo developers, and use taxpayer money to compete against ordinary homebuyers and renters. Just as troubling, both governments have struggled to explain the program’s basic details including whom it is meant to help and how “affordable” these homes will actually be.

Some Canadians may have been surprised that such a blatantly flawed program was introduced by the Carney government, which has leaned heavily on the prime minister’s reputation as intellectually serious and technocratically competent. After all, if any government should be expected to avoid such a boondoggle, surely it would be one led by a Harvard-trained economist and former central banker.

But that’s precisely the lesson. A new leader, even one with impressive credentials, does not change the reality that governments are systemically prone to these kinds of failures.

The problem is generally not that politicians and bureaucrats are ill-intentioned or incompetent. Clearly, many capable and well-meaning people work in government. The deeper, more structural problem is that the incentives politicians and bureaucrats face are often misaligned with good policy.

Politicians must win elections, satisfy supporters, manage pressure from organized interest groups, and show voters they’re “doing something” about urgent problems. Bureaucracies, meanwhile, face little direct reward for cost-effective success and little direct penalty for expensive failure. And because voters cannot realistically study every program in detail, governments have room to favour policies that look active, compassionate and urgent, even when they are vague, costly or poorly targeted.

Governments also face soft budget constraints. Private businesses eventually go bankrupt if they continually lose money, which acts as a hard constraint on their spending habits. On the other hand, governments and Crown corporations can almost always rely on taxpayers to bail them out. Just look at the billions in losses racked up by Canada Post. This allows those in government to be less disciplined in how they spend their budgets.

Taken together, these incentives often reward politicians and bureaucrats for visible activity rather than measurable results. Therefore, they prioritize splashy announcements over careful policy design, vague promises stand in for clear targets, costs are obscured rather than weighed honestly, blurred responsibility undermines genuine accountability, and policymakers rarely stop to consider whether government should even be involved in the first place. Simply put, government operates very differently from how many people envision.

These incentive problems help explain why so many government programs fail to achieve their stated goals, or do so at a much higher cost than promised, and despite repeated failure, continue seemingly indefinitely.

A recent example is the ArriveCAN app, which saw the federal government spend an estimated $59.5 million to develop a simple application intended to help streamline border entries during the pandemic. But a scathing report from the auditor general concluded the government “repeatedly failed to follow good management practices in the contracting, development, and implementation of the ArriveCAN application,” and that it “did not deliver the best value for taxpayer dollars spent.”

Or consider the Canada Infrastructure Bank (CIB)—a federal Crown corporation intended to “catalyze” investment for “public interest” infrastructure projects in Canada. Despite grand promises, during its first seven years only two CIB-financed projects were completed despite the approval of more than $13 billion in federal spending across 76 projects (as of July 2024). This inability to progress projects was a key reason why a 2022 parliamentary report recommended the government abolish the CIB.

The Trans Mountain pipeline expansion is another example. The pipeline, which was originally proposed in 2013, faced years of delay (primarily caused by onerous and changing government regulations) until the project’s original private-sector proponent withdrew from the project in 2018. The federal government intervened and purchased the project for $4.5 billion, at which point costs began to skyrocket. By the time it was ultimately completed in 2024, the pipeline had cost an estimated $34 billion—more than six times the original estimate of $5.4 billion.

And these recent examples are just the tip of the iceberg. A 2013 study of auditor general reports from 1988 to 2013 identified 614 instances of government failure spanning multiple federal governments.

These failures were not merely caused by uniquely poor decision-making by governments of the time— though that certainly can play a role—they reflect a deeper problem. Government institutions face incentives that often reward activity over results, obscure accountability, and tolerate failure in ways many Canadians do not expect.

Let the Carney government’s condo debacle serve as a warning. Changing the leader at the top does not change the incentives inside government. No matter how credentialed a leader may be, governments remain prone to vague costly policies with unclear results and weak accountability.

Grady Munro and Austin Thompson are Senior Policy Analysts with The Fraser Institute.

Quick facts

Launched in April, BCSF is investing $51 billion over 10 years in infrastructure across Canada that supports economic growth, housing, health care, education, public transit, sport, and climate adaptation. Funding is delivered through three streams: the Provincial and Territorial stream, the Direct Delivery stream, and the Community stream.

• The online portal is now open for BCSF applications under the Direct Delivery stream for projects that are shovel-ready in 2026.

• Additionally, British Columbia will receive $326 million through the BCSF’s Community stream in 2026-27 to support core infrastructure projects across the province, coming to a total of $1 billion for the next three years (2026-27 to 2028-29).

• Across Canada, projects supported through the BCSF are expected to support an average of 42,000 jobs annually and boost Canada’s GDP by $95 billion over the next decade.

• New funding announced under the BCSF today is being delivered through the Provincial and Territorial stream, pending a bilateral funding agreement with the province.

• Starting in 2026-27, under the Direct Delivery stream, Canada’s Regional Development Agencies are delivering $1 billion in funding over four years to support vital infrastructure projects that strengthen communities and advance regional economic development.