Canada’s housing market is a complex stew of political and economic ingredients that includes federal indifference, provincial mismanagement, local NIMBYism and global economic factors that include a pandemic. They have all conspired to drive up interest rates faster than at any point in decades, and put a long-simmering crisis into a rolling boil. But for Conservative Party of Canada Leader Pierre Poilievre, it all comes down to just one factor: Justin Trudeau’s government.
Witness his latest video on the subject, one that blames Pierre Trudeau for the inflation crisis of the 1970s and early 1980s and suggests his son is responsible for the repeat that’s underway. In reality, the earlier spike was driven by the 1973 OPEC oil embargo, and inflation continued to rise in countries like the United Kingdom and the United States long after they elected their own slogan-spewing conservative leaders. But facts and nuance are only occasional guests in Poilievre’s world.
Case in point: his assertion that Canada has the fewest houses per square kilometre of any country on Earth, and “with all that land, we should be able to easily build affordable homes for anyone who wants to have one.” This assumes an acre of land in the Lower Mainland or Greater Toronto Area is the same as one in Alert, Nunavut, or Churchill, Man., which is either deliberately deceptive or manifestly idiotic. After all, there are many reasons why people in Canada tend to congregate as close to the United States border as possible, including economic opportunity and personal comfort. But the inventory of desirable land available for housing that people will want to buy or rent in large numbers is actually a tiny fraction of our overall land mass, far smaller than what the United States has to work with. That helps explain, in part, why their housing market is so comparatively sane — and why a house in Buffalo, N.Y., might be cheaper than one in Niagara Falls.
His video also points out we’re building the same number of new homes today as we were 50 years ago, despite having a population that’s nearly twice as large. But if you look at the data, it quickly becomes clear it’s being gerrymandered (again) in Poilievre’s favour. The early 1970s were the high-water mark for home building in Canada, with 257,000 new units completed in 1974. By the early 1990s, that was down to less than 120,000, and it didn’t come close to meeting that mark until — ironically — Justin Trudeau’s Liberals were in office.
So why were we building so many homes in the 1970s and so few in the 1990s? Let’s give Poilievre the floor for a moment. “Why is that?” he asks in his video. “What is standing in the way? The answer, in a word, is government.” He was referring to government standing in the way of new construction. But the truth is, by abandoning the co-operative and social housing programs that led to the 1970s building boom, governments — both Liberal and Conservative, to be clear — have been standing in the way of additional housing supply for a long time now.
This is the key weakness in Poilievre’s otherwise winning housing message, and it’s one the Liberals must exploit if they want a chance of winning a fourth consecutive election. He’s right to pressure municipal governments and require them to increase building permits or lose some portion of their federal funding. He’s right that any new transit investments should be paired with pre-zoning and permitting of higher-density apartments around the stations. And he’s right to say more housing is part of the solution to Canada’s increasingly treacherous housing market.
But building the right kind of housing, in the right kinds of places, is even more important. Poilievre’s visions clearly makes more space for the kinds of communities he grew up in, ones that expand and extend the limits of our cities and lock their residents into the sort of car-dependent living that raises costs for both homeowners and taxpayers. “These neighbourhoods gave hope and opportunity to families that needed it most,” he says. “Families just like mine.” What he neglects to mention is that they also helped enrich the developers who built them — and who want to build new homes even further away from key infrastructure and services.
Rather than government getting “out of the way,” as Poilievre suggests, it needs to find ways to get back in the game. This is where the Liberals and New Democrats have to come in. We need an alternative to Poilievre’s dumbed-down approach that trades in half-truths and gerrymandered data. We need an optimistic vision of the future in which Canadians aren’t forced to choose between urban sprawl and economic survival. And we need solutions that target the real stress points in our housing ecosystem rather than cutting a blank cheque to politically connected developers.
We’ve already seen what that looks like in Ontario. For all of his talk about building new homes — and using the Greenbelt to do it — Doug Ford’s government has achieved exactly three of the 55 recommendations contained in the February 2022 report from his province’s Housing Affordability Task Force. That includes the easiest by far, which is to “set a goal for building 1.5 million new homes in 10 years.” The other two his government has completed are promoting the skilled trades and making secondary suites legal provincewide.
But Ford did manage to transfer more than $8 billion of wealth onto the balance sheets of a small handful of developers, some of whom just happened to be donors to his Ontario PC Party. And that, in the end, is the more likely priority here for conservatives: not affordability or justice for younger Canadians but the elimination of anything that stands between home builders and their profits. Yes, the private sector has a major role to play in addressing the housing crisis, but it’s one that should be very carefully defined by governments. The sooner they get back into this game, the better off we’ll all be.
Comments
Ascribing half truths to Pierre Poilievre's claims about housing, or anything else he spouts, is a gross exaggeration, they are mostly total fabrications and distortions of the truth.
PP does not ever tell the whole truth about anything. He is right though that we need more housing. Affordable housing, not large single family houses in the suburbs is what is needed. One model the federal government should look at is the one employed by Habitat for Humanity. I don't know all the details, but I do know it provides a path to home ownership for those that wouldn't have been able to ever consider that. Home ownership should be the eventual result, not perpetually being a tenant.
Habitat for Humanity is based on sweat equity (by candidates for ownership) ... and volunteerism. It could be used to train trades workers.
The problem with Habitat's sweat equity formula is that it assumes people who badly need housing are able-bodied and not so pressed for time that they just cannot devote the number of hours required to qualify. If the candidate for ownership were able to arrange substitute "sweat," it could work for the broader community. It can't work for anyone living from paycheque to paycheque, because leaving work to help build a house -- or leaving children to fend for themselves -- isn't an option.
The entire problem could be put paid to by simply allowing one and only one residence to be owned by any individual, with the proviso that they occupy that residence themselves or have their cash-flow and any new equity taxed heavily.
In Toronto, over the past several years, something on the order of half of residences were purchased by investors, who typically do minor upgrades and rent at a rate that will provide not only a profit eventually, but really nice cashflow as well.
As to the infill and density formula, downtown Toronto is more densely built than Tokyo or Beijing. I gave a reference for that some considerable time ago.
My neighbourhood has been targetted for increassed densification ... next thing we'll find is that once again there's insufficient water pressure, and the sewers are inadequate to the job. And everyone will be breathing the toxic laundry exhaust fumes ... typically at ground level from big buildings. Schools will again be over-populated and under-staffed. People will again have to go farther to see a doctor, even at a walk-in clinic. The last time I was at one, people had come from downtown and from North York, only to find that the "list" (of patients who'd be seen that day) had been closed hours before they arrived.
It's useless to solve one problem by making others.
In the meantime, a full half of all households are lone occupants, and a higher proportion of renters, paying for the cash flow of the greedy-guts lazy bum investor-landlords who make a lovely living just collecting rent, many of them without having invested any of their own money to begin with.
As far as "the builders" go ... their profits could be capped at a reasonable percentage of the price the residence is sold for. If that discourages the larger, international builders, then so be it. Mr. Ford's friends would scream bloody murder, and so would Mr. Ford. But there's no reason at all that builders need to have the outrageous profits they do.
When half of property purchasers are by investors, purchase prices and rents go hand in hand, making it harder for anyone shy of middle age to accumulate a down-payment, or to rent premises not subject to rent control. And those who vacate a suite even in a very old building, don't "make room" for someone else with their level of income, as the rent increases the moment they leave. I know of instances where that has been to the tune of 30-35%.
The affordability problem is two-pronged: "investing" in homes drives up rents AND property prices, and that goes hand-in-hand with lack of any real rent control that survives the current tenant.
It's not going to happen at the city level in Toronto, because despite their nice remuneration, many of them also own investment properties. You can find the numbers by googling.
My big b*tch with some of the solutions is that I get less and less sun in the garden ... so that I can't grow food. All high towers deprive existing gardens of light. Of course, that's not an issue for middle-class advocates of half thought through policy. Thirty somethings, just like teenagers, think they know everything, even when they don't.
"the high-water mark for home building in Canada, [was] with 257,000 new units completed in 1974." And it dropped by 50% over the next decades because the governments stopped building houses, led by the federal government abandoning programs and the provinces following along. All the while advocating "less government". The other consequence was the rise in homelessness, a social phenomenon that barely existed in 1980, as the supply of affordable housing dwindled to nothing.
All that is true. It's painfully obvious that all three levels of government have to pull in one direction on building public housing. The non-profit, break-even model may be the best option where thousands of rentals are built in a plethora of architectural forms (sans single family detached) with rents set at the break even point after construction costs and management, maintenance, replacement and depreciation are factored in. The clincher would be free land donated by cities; land costs are significant in urban real estate, and if deducted from the building program they would bring down the rents to well below average, especially considering the profit margins and price instability of the private sector.
About 1/3rd of the public housing program would be subsidized, designated supportive housing with good service levels, self-managed co-ops and grants for co-housing. The program could also partner with Health Canada and provincial health ministries to address treatment facilities for addictions and mental health. Four pillars harm reduction and safe supply don't seem to be adequate today to bring stability into the lives of the afflicted.
Lette to Editor Re: Prioritizing people over profit is the way forward on the housing crisis,
Marie Josée Houle, September 7, 2023
https://www.thestar.com/opinion/contributors/prioritizing-people-over-p…
Long term affordability requires more non-profit housing. In cities such as Vienna where over 60 per cent of housing is non-market, wage earners are guaranteed affordable homes and housing stress on the middle class is virtually eliminated.
In addition, an increase in market taxes would not only hinder speculation but also capture housing profits for public purpose. Funds raised can be used to purchase land banks and create more community-owned and co-operative housing which along with rent regulation will stabilize the cost of housing.
The purpose of housing must preeminently become the provision of places where people can comfortably live, and not a vehicle for foreign and domestic investors, fueled by bank loan leverage, to continually trade up prices.
Footnotes:
1. Tax Land to House Vancouver’s Fleeing Middle Class
We don’t have a housing problem, we have a land speculation problem.
https://thetyee.ca/Opinion/2017/09/01/Vancouver-Fleeing-Middle-Class/
"Perhaps under our present circumstances it’s time to look further afield for models, like Vienna where over 60 per cent of housing is held outside of markets, or Singapore where the number is over 80 per cent. In these attractive cities, wage earners are guaranteed an affordable home and housing stress on the middle class is virtually eliminated."
2. China – Avoid the West’s Debt Overhead: A Land Tax is needed to hold down Housing Prices
http://michael-hudson.com/2013/07/china-avoid-the-wests-debt-overhead-a…
"Banks want to lend as much as they can, to absorb all the rental income if they can do so. So they naturally back “anti-government” tax ideology – and as a byproduct, oppose government spending and all other public services. The trick is to convince homeowners and other voters that lower taxes will make the cost of housing less expensive – instead of shifting the beneficiaries of land rent from governments to the bankers. And to cap matters, bankers seek to distract voters from realizing that if the government does not tax land rent and other unearned income, it must burden labor and capital – consumers and employers. In other words, voters themselves!"
3. In World's Best-Run Economy, House Prices Keep Falling -- Because That's What House Prices Are Supposed To Do
https://www.forbes.com/sites/eamonnfingleton/2014/02/02/in-worlds-best-…
"The German system moreover is deliberately structured to encourage renting rather than owning. Tenants enjoy strong rights and, provided they pay their rent, are virtually immune from eviction and even from significant rent increases.
Meanwhile demand for owner occupation is curbed by German regulation. German banks, for instance, are rarely permitted to lend more than 80 percent of the value of a property, thus a would-be home buyer first needs to accumulate a deposit of at least 20 percent. To cap it all, ownership of a home is subject to a serious consumption tax, while landlords are encouraged by favorable tax treatment to maximize the availability of rental properties."
4. BIS Working Papers No 433 Can non-interest rate policies stabilise housing markets?
http://www.bis.org/publ/work433.pdf
"Among the policies considered, a change in housing-related taxes is the only policy tool with a
discernible impact on house price appreciation.
.... policies considered consists of measures that affect the cost of
purchasing a home. They include taxes (such as capital gains, wealth and value
added taxes), subsidies (on first-time home buyers and young couples and also on
mortgage interest payment), fees (such as stamp duties and registration fees) and
tax deductibility of mortgage interest payments. For brevity, all are referred to as
housing-related taxes"
5. Canadian Speculators, Not Foreign Money, Are Driving up Home Prices
https://thetyee.ca/News/2017/05/20/Canadian-Speculators-Not-Foreign-Mon…
"The price it costs to borrow money from a bank is determined by federal interest rates. In Canada, they’ve been in a freefall for decades, from a high of 16 per cent in 1991 to 0.5 percent this year. Now consider that the average annual return for investing in a condo tower or apartment complex in Vancouver was 14 per cent last year. “It was almost stupid to not buy property at these rates since it was almost free money,” Punwasi wrote.
With speculators competing for property to invest in, prices rise. Or in the technical language of Vancouver real estate firm Morguard: “Strong fundamentals will attract investment in a market that continues to generate attractive returns. Therefore, upward pricing pressure is likely to persist.”
6. 'Sick City’: What the Pandemic Tells Us about Our Housing Crisis
https://thetyee.ca/Culture/2021/05/07/Sick-City-Pandemic-Housing-Crisis/
"If speculators know their windfalls will be whacked by taxes they won’t buy and flip property, so land will remain cheaper and whatever does get built won’t reflect inflated costs.
He also proposes zoning that mandates below-market housing be built as a certain percentage of any new development...
***
The market for urban land is the problem, not the number of housing units produced. Adding new density just inflates land price and enriches land speculators.
***
Cambridge .. passed an “Affordable Housing Overlay” zone that covers the entire city. It allows a doubling of density on any parcel, if and only if the entire building is permanently affordable to those making median area wages or less..With this restriction it stabilizes land prices and lets the non-profits compete for land on equal footing with market housing developers.
***
...doing what we do now, incentivizing high-priced housing construction in the hopes that it will make housing prices fall is obviously not working. What we are doing now is raising average rents, displacing renters and adding to the land price feeding frenzy that enriches only land speculators. What we are doing now is driving our kids and grandkids out of the city they grew up in and forcing our crucial frontline service workers out of a city they can no longer afford. This is how cities die."
Thanks for this analysis, Larry.
A couple of points on Vienna. The 'Vienna Model' is about 80 years old and originated with a communist democratic government, I believe it was during the Great Depression. It has done a lot of good for stabilizing housing supply and prices -- more accurately, rent charges -- but it has also evolved as it survived war, several recessions and changes in political orientation at several levels.
Part of that evolution is Vienna's dependency on ten layers of absolutely massive injections of public grants. One federal and nine state governments hand over literally hundreds of billions of euros every year to Vienna and a few other cities for housing. It comes from general national revenue and possibly a few dedicated taxes. It goes up and down with political ideology, but it's always been there to count on.
The great flaw in Condon's reasoning in his Tyee series on Vienna is that he believes a similar level of annual funding would come from taxing "land lift" that results from land price escalation as development and speculation occurs. Someone running in an election for mayor whose central policy platform is to tax the hell out of land to the tune of $200-500 billion a year would be decimated at the polls, not just by wealthy Cremeland land owners, but by the average middle class and those young adults and families just starting out who cannot purchase any home while facing a wall of steep taxes on already unaffordable land.
This is quite a ludicrous idea in the vacuum of federal and provincial public housing funding. Instead, all three levels of government should be strongly advised to set reasonably large targets for new public sector non-market rental housing where the rents cover construction and operating expenses without the price of land factored in. All levels of government have land banks in cities that could be repurposed for rentals or traded for land in better locations with transit and multi-zoning already in place.
This idea would create, over a generous period of time, a critical mass of non-market housing that would act as a stable counterweight to the roller coaster market. It also requires cities, provinces and the feds to disabuse their developer donors of thinking they will remain able dictate housing strategies that favour them over the common good. Private money has to be taken out of politics ... but that's another topic.
Vancouver has run out of land but is still impacted by a 13% average demographic growth rate. Mountain Math has done the data analysis and found that detached single family houses on open lots have historically consumed 80% of residential land but accommodates only 30% of all housing. Folks can harp about speculation and affordability all they want, but that land use fact says a lot about about the planning and political processes that force 70% of housing in the city to be crammed into the remaining 20% of residential land. Towers are more visible than the majority of Vancouver's area which sprawls right up to its geographical boundaries. Moreover, the least dense areas on the politically powerful West Side are shrinking in population whereas the lower income East side and downtown are taking more than their fair share of growth.
Vancouver until only very recently has avoided intelligent, reasonable infill and urban design models from the European cities it praises, including Vienna. Vienna is far denser than Vancouver, yet it doesn't have a lot of high rises. It has a decent metro system and trams and buses and walkable neighbourhoods with stores and cafes everywhere. To address housing affordability, the urban economy and climate-related building energy efficiency one has to also address urbanism.
Pumping up property taxes by orders of magnitude will not result in an efficacious, affordable city. Quite the opposite, actually.