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Opinion Canada’s housing market – built on faulty assumptions – is falling down on affordability

Jennifer Keesmaat is the chief executive officer of the Keesmaat Group, working with corporate and political leaders to advance change in cities around the world. She is the former chief planner of Toronto.

Over the past 20 years, Toronto and Vancouver – two of Canada’s three most populous cities – have built 400,000 homes between them. That’s an enviable number for any city in North America seeking to increase supply, a reliable tactic for relieving a housing crisis.

But for its efforts, Toronto and Vancouver continue to top international rankings of unaffordable cities. That highlights a cold reality: We cannot build our way out of this affordability crisis.

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We’re not alone. In cities such as Cairo, Sydney and New York, real estate has become hyper-commodified. Housing is now seen as a matter of selling, not dwelling, as made plain by Wall Street’s growing interest in the business of housing. And as a result, people cannot afford shelter – even though a significant number of housing units in those very same cities remain wholly unoccupied.

The fundamentals of Canada’s housing system are broken. And while there is a way forward that’s within reach, it will require us to reject many tightly held 21st-century assumptions about the housing economy.

One is that housing affordability can be addressed by increasing supply alone. Where city planners once used population-growth forecasts to assess the need for new housing supply, assuming that each home would become a place for those people to build a life and contribute to a neighbourhood, new supply is being gobbled up by investors seeking a place to park capital. As a result, escalating prices have been delinked from how much people make, creating obstacles for the kinds of people who are essential to communities, such as teachers and tradespeople, to own a home. Just look at the gap in Toronto: 14,771 new dwellings came onto the market last year which, by traditional planning measures, is just shy of the needs for anticipated population growth of 41,000 annually – but according to the most recent census, the average family made $82,859, while the Canadian Real Estate Association found the average price of a home in Toronto as of February was $767,800.

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Another question worth asking is why governments remain the primary proponents of private home ownership, as has been the case since the Second World War. Governments control the market’s levers, through interventions like infrastructure spending, financial mechanisms like adjusting interest rates and lending rules, and through organizations that facilitate home financing such as Fannie Mae and Freddie Mac in the United States, and the Canada Mortgage and Housing Corporation here.

But, not all interventions are good. In its recent budget, the federal government announced it would assist with down payments for first-time homebuyers – thereby subsidizing an already hot market, and arguably further driving up the cost of housing – which only plays into the commodification problem. After tightening lending rules to mitigate the risk of a market collapse from borrowers being unable to repay loans, the government is just providing more access and more reasons for Canadians to take on debt.

And then there’s the assumption that home ownership is inherently more stable than rental. Yes, baby boomers lived that experience, enjoying stability and an uplift in value that turned homes into nest eggs later in life. But it’s unlikely that these circumstances will materialize now, given the high cost of housing today in relation to wages. Rental housing, meanwhile, is only unstable because we have not focused on delivering rental as a real, long-term housing choice. In cities such as Vancouver and Toronto, high-quality, purpose-built rental housing has been a low priority over the past several decades and left to the market to figure out. Real-estate investors, meanwhile, buy units because of low vacancy and high demand, and then rent them out according to what the market can deliver, thus stoking this commodification cycle.

These hoary assumptions distract from the real goal: responsive public policy that delivers access to good, stable housing for all. Political leaders must focus on solutions that include high-quality, purpose-built, affordable rental units, rather than forcing the square peg of postwar mentalities around housing into the round hole of today’s housing climate. For an example, we can look to western European cities such as Vienna and Amsterdam, which require all new development to have a three-way split of social housing, affordable and rent-controlled housing, and market or ownership housing. With that simple switch in policy, these cities are genuinely making housing more accessible.

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If we really believe that housing is a resource that should be available to all, then we need to upend our fundamental and flawed assumptions about how housing works. Because right now, we’re just building on top of them.

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