Canada’s upcoming federal budget will earmark more money to address homelessness, including funds for supportive housing, as cities struggle with encampments and growing unsheltered populations.

Prime Minister Mark Carney’s government has said improving affordability and stimulating growth will be top priorities of the spending plan, which will be presented Thursday. Tackling the country’s homelessness problem will be a focus, said people with knowledge of the budget who spoke on condition they weren’t named.

The government will also encourage provinces to contribute funding for supportive housing, which provide wraparound services such as mental health support and case management, the people said.

In the years since the Covid-19 pandemic, rising homelessness has strained health and municipal resources and fueled concerns about public safety and drug use in many urban centers. That’s colored political races across the country, sparking debates over encampments and safer supply policies.

“If you look at the what I call the pyramid of affordability, it starts with a place that you can afford to live, a safe place,” Finance Minister Francois-Philippe Champagne said at a public appearance Monday.

The government’s flagship homelessness reduction and prevention strategy, Reaching Home, is set to run out of funding when the National Housing Strategy expires in 2028. Housing Minister Gregor Robertson has confirmed the government is working on a new strategy, but hasn’t said when it will be unveiled.

The Carney government has promised to expand the country’s non-market housing stock through Build Canada Homes, a new Crown corporation designed to improve the country’s housing stock. The federal organization was capitalized with C$13 billion ($9.3 billion) when it first launched in 2025. Of that funding, C$1 billion was earmarked for supportive housing.

A federal report found the total homeless population on any given night has increased by 59% between 2020 and 2025, with a larger share of that population experiencing homelessness in unsheltered locations, including encampments.

In Ontario, Canada’s largest province, more than 35,000 people were experiencing chronic homelessness in 2024-25, up by 37% from 2022-23, according to findings from the province’s Financial Accountability Office. In January, the mayors of Ontario’s 29 largest cities asked the province to declare a state of emergency to address the problem, which they say has created a community safety and humanitarian crisis.

Newly elected Quebec Premier Paul St-Pierre Plamondon has also promised to hold a summit on the homelessness crisis in his province.

The trends stand in contrast with a pledge by former Prime Minister Justin Trudeau’s government to decrease chronic homelessness by 50% by 2028, compared to 2016 levels. It also coincides with an erosion in housing affordability in 2022 and 2023.