If there’s one non-partisan, independent public inquiry Canada needs as much as one on foreign interference, it’s an examination of how the country has descended into a housing affordability crisis.
This would be a look back at this slow-rolling disaster played out over years, beginning in Vancouver and Toronto, then spreading to Halifax, Guelph, Ont., and Kelowna, B.C. For a long time, it wasn’t an issue prioritized by politicians – maybe they thought it would sort itself out. Or perhaps it was because nearly all policy-makers already owned homes.
But now the situation is so dire it can’t be ignored by the well-housed. People with decent jobs are couch-surfing and living in vans, some skilled immigrants are leaving Canada in a huff, and the entire system is frozen by soaring costs and fear (supply is limited in part because no one wants to let go of what they already have). Home prices have dropped from 2021 pandemic peaks, but they are still high, and with increased interest rates, affordability is as bad as it has ever been. The prospect of a further Bank of Canada rate hike this year is both absolutely terrifying and probably absolutely needed.
If you’re not already in the housing market, you’re at risk of never getting in. If you have a lot owing on your house, you’re at risk of being swamped by mortgage interest charges. There’s now a wide economic chasm between homeowners with equity and non-homeowners or more recent homeowners.
It’s playing out even in Alberta, that work-focused, Prairie bastion of somewhat affordable housing and land. In Calgary, real-estate prices and rent hikes (no rent control here) are leaping ahead in a way that’s reminiscent of 2006 or 2007 – boom years when oil prices soared. This time around, the economy is not bad, but there’s nowhere near the same level of economic activity.
Workers are moving to the city. So are a stream of investors who have noticed Calgary’s proximity to the mountains but also to condos that average $300,000. The influx has contributed to residential selling prices that have gone up the last year despite higher interest rates. The premise that Alberta is Calling you to a family home you can afford is being severely challenged. This month, Calgary city councillors who voted against a housing affordability plan, citing concerns about density and parking, got a swift public rebuke. Even a city where single-family home zoning is revered, the councillors were forced to revisit their decision.
My mother warned when I bought my first home: Remember, you don’t own the house, the house owns you. But maybe that’s only true if you’re a mortgage-paying schlep. If you’re an outright owner, or a person who owns a number of properties, it’s a different ball of wax. Everyone understands the allure of being in this latter position. Real estate has been a massive wealth generator for Canadians, again and again reaching previously unimaginable heights.
But it’s gone too far. As BMO’s report on Canada’s Affordability Conundrum said last month, “the investor class is increasingly dominating the Canadian housing market.” It pointed to a Statistics Canada study that found in British Columbia, Manitoba, Ontario, New Brunswick and Nova Scotia, more than one in five dwellings are owned by investors. “If anything, that share likely rose further during the pandemic,” BMO economists Douglas Porter and Robert Kavcic wrote.
Almost 15 per cent of detached homes are now investor-owned, they added. “Some analysts assert that investor demand helps create supply, so is thus not a big factor in the affordability issue. That may be the case in some new condo developments. But is clearly a spurious line of reasoning on existing houses, where investor buying is compounding a tough affordability situation.”
Certainly, Canada’s sharp increase in immigration plays a role: The country’s population clock ticked over to 40 million people on Friday. A long period of record-low interest rates is, of course, in large part to blame, and the problem of housing affordability exists well beyond our borders.
But it is worse here. The BMO economists said, “there isn’t much debate that Canada’s home price inflation has been much stronger than in most other major economies, over a long period of time.” And Globe personal finance columnist Rob Carrick said an honest Canadian government would tell millennials and Gen Z sorry, “the housing market got away from us and we don’t see a way to walk it back.”
Given the collective shrug of the shoulders, it’s understandable that some young students and workers have become angry real-estate nihilists.
But it would be nice to know what exactly has happened. Pierre Poilievre has built much of his political rise on social media posts focused on the absurdity of the housing market. But while the combative Conservative Leader is good at identifying the issue, there’s far more to the story than the “gatekeepers” he is focused on.
This is the tricky part for any politician. None can afford to alienate the two-thirds of Canadian households who own their home. No one wants to use “nuclear option” to fix the market, as Mr. Carrick refers to it, of phasing out the tax exemption on the sale of a principal residence.
Is it possible to do something more gradual and proactive? As Ontario Premier Doug Ford and the federal Liberals embark on massive home-building campaigns, how do we not mess it up? How do we make sure any new builds don’t get hoovered up by hedge funds, or people who can make cash offers?
Canada has to consider ideas for giving the people working, studying and raising children here more sway in the housing market. One former MLA, Richard Gotfried, who has worked in the building industry and as a vice-president at Calgary Economic Development, is developing a set of proposals for how Alberta could make home ownership more attainable. It goes beyond social housing to expand the availability of rent-to-own, shared equity and low-interest loan plans, aided by generous tax incentives and housing help for seniors who put their family-sized homes on the market, adding to supply.
Further interest rate hikes will eventually slow down the economy, and the housing market. But if I got to draw up the parameters of a public inquiry into the housing crisis, the basic questions would be: Why is it more grim in Canada compared with other Western countries? How did we get to this point? How can we make sure it doesn’t get worse again?