I could be wrong, but this is probably to do with the closure of the York Hotel as a low-income housing space (which was in turn because the Encana development will involve the York. I remember a piece on the news a few months ago where some SAIT students were getting evicted to make room for some of the tenants from that building, and at that point they still needed to find a lot more units.
As others have said, there's no reason why the city can't build a new development for these people--hell, they could even build something to accomodate a lot more low-income residents. Lots of vacant land east of City Hall (but they're probably still hoping to resurrect their east-village idea). Or just buy one of the hundred or so Impark lots and build something there.
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