Gavin Swartzman is chief executive officer of Peerage Realty
As Canadians slowly emerge from lockdown and re-engage with family and friends at barbecues and picnics, there are two almost certain topics of conversation this summer: the soaring price of houses and the pending federal election.
The convergence of these two topics is worrisome: The last thing we need in the face an acute housing supply crisis is political posturing and election promises that obscure the urgency for action. The risk is that political expedience will encourage tinkering with quick-fix demand side remedies rather than tackling the complex, long-term and systemic supply-side challenges.
Voters who have emerged from the pandemic with a voracious appetite for housing. As the supply/demand imbalance drives prices skyward, Canadians who feel they will never be able to afford a home are unlikely to support any party that doesn’t offer them at least a twig of hope, however misguided.
Eager to score some pre-election points, the federal New Democrats have already declared their intent to revive steep taxes for foreign property owners.
It’s worth noting that the timing of reactive, demand-driven housing strategies is particularly precarious as Canada finds it feet in the postpandemic era. The latest figures indicate that after remarkable price spikes, real-estate markets across the country are stabilizing on their own. This, despite the loud, public call for immediate government intervention from many quarters – including at least two of Canada’s Big Banks – just weeks earlier.
Let’s also remember that we’ve been here before – more than once. In 2017, facing 33-per-cent year-over-year increases in Greater Toronto Area home prices, federal, provincial and municipal leaders convened an emergency summit. The Ontario Liberals, flagging in the polls (and acutely mindful of a similar housing price spike that contributed to the 1990 demise of premier David Peterson’s Liberal government), introduced demand-side measures that taxed foreign property owners. It was an approach that British Columbia also embraced, cooling prices in the short term.
The limitations of demand-side measures are highlighted as the Canada Mortgage and Housing Corporation slinks away from its failed attempt to curb housing demand by making mortgages more expensive to insure. We’ve also seen the tepid results from the federal government’s First-Time Home Buyer Incentive, coincidentally launched in September, 2019, by the very same Crown corporation. The three-year program has doled out a mere $178-million of the allocated $1.25-billion to fewer than 10,000 Canadians as of the end of March – even with expanded eligibility criteria.
Anyone who remains skeptical about the dangers of deferring supply solutions need only consider the data. Canada currently has just 424 housing units per 1,000 Canadians, the lowest level of all Group of 7 countries. Even before the targeted arrival of 1.2 million immigrants between 2021 and 2023, we need an additional 1.8 million homes to meet existing population levels. A not-so-fun fact? We have constructed just 188,000 new homes in the past decade. Furthermore, the COVID-19 pandemic slowed approvals and construction in 2020, a delay that was exacerbated by labour and materials shortages in 2021.
When it comes to getting the supply ball rolling, a number of options are available. The catch, however, is frequently political.
At the municipal and provincial levels, politicians heed their constituents, few of whom embrace the idea of greater density or mixed development in their own neighbourhoods. Neither is there much incentive to change the entrenched paper-based project approval process that takes an average of 250 days for Toronto-area developers. Mounting development charges are an important source of government revenue, but they are also deterrents for builders and contribute to higher house prices.
In the great Canadian tradition of federally proffered carrots, Ottawa could tie future infrastructure funding for transit and waste-water projects to cities that meet density targets. But that diverts much of the valuable political credit away from Parliament Hill, making it a less attractive approach – especially at election time.
Having identified and documented the gravity of the housing issue, the usual next step is to call for all three levels of government to work together toward a long-term solution. Time may be of the essence, but with a likely federal election this fall and municipal and provincial elections slated within a year, don’t get too hopeful about progress any time soon.
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