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Opinion To create affordable housing, let’s banish the hoary myths of home ownership

Jennifer Keesmaat is CEO of the Keesmaat Group and the former chief planner of Toronto.

For years, Canadians have watched our cities climb the wrong kinds of global lists – the ones ranking the most expensive cities in the world to live in. Our fears have only been fuelled by our daily experiences: people bounced from rental to rental because of landlords’ or investors’ bottom-line desires. We’ve worried that even rental housing has grown out of the realm of affordable housing.

None of that is particularly new. But last week, the Canadian Centre for Policy Alternatives provided evidence backing up those fears: in most major cities in Canada, there are no neighbourhoods where a minimum-wage worker could comfortably afford an average-priced one-bedroom apartment.

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We need more housing in Canada, and we could easily have more high-quality, affordable rental homes – but the way our cities are planned strongly suggests we simply don’t want more. We haven’t valued renting as a housing choice, and so governments have under-built rental housing in Canada through policy frameworks that both echo and reinforce our belief that housing ownership is better than rental housing.

But that is largely because of a series of pervasive, foundational myths underpinning our approach to housing. Undoing them will be a critical first step toward fixing our housing system, and ensuring everyone has access to housing choice.

The first myth is that housing is a free-market system – that renting requires government intervention, but ownership is powered by individual efforts and bootstraps.

In actuality, our housing market is highly regulated, and the oft-overlooked reality is that the market only exists because of government regulation. The foundation of home ownership for the majority of Canadians – access to lending – is controlled by governments. Through tools such as interest rates to facilitate borrowing, the “stress test” for uninsured potential home buyers, and the First Time Home Buyer Incentive program, the government controls the levers of the housing market.

This myth is reinforced by criticisms of government policies that facilitate the rental market as undue interference in the market – and the connotations we’ve erected around rent control, which seeks to mitigate undue rent increases by limiting them, typically on an annual basis and by a specific percentage point, often linked to the rate of inflation. Yet, it’s strange we never refer to the problems of “mortgage control.”

There’s another myth that infuses our policy and city-planning: that renting is transitional housing, or the poor cousin to home ownership. That stems from the alluring but largely debunked idea that ownership is always a good way to accrue wealth. This might be true for a portion of the population that purchased a home at the right time, in the right neighbourhoods, at the right price, with favourable financing – that’s a lot of qualifiers. But an idyllic and well-timed life – no divorce, the ability to comfortably hold your house for decades, ideally since the middle of the last century, following the postwar boom when supply was abundant – is the exception. For the vast majority of Canadians, these circumstances did not, and will not, exist.

In fact, owning can have higher unrecoverable costs, such as taxes, maintenance and the cost of capital, than renting. And yet in the emotional process of purchasing a home, we often underplay those costs, and fail to undertake rigorous analysis that will verify the assumptions that underlie our thinking. Too frequently, the biggest purchase of our lifetime is undertaken on the strength of faith that wealth accumulation is likely and possible.

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Finally, there’s another myth that drives people to strive for ownership, even if it creates a precarious financial situation for the household: the entirely understandable desire for stability.

But Germany offers a counterpoint. For a variety of complex reasons, including the legacy of the Second World War, the country has one of the lowest home-ownership rates in the Western world at just more than 51 per cent in 2017. But it also has one of the highest rates of satisfaction with housing, at 93 per cent. That’s because of a significant part of the German experiment: Most people live in rental housing, and it has been purpose-built as rental housing: high-quality, well-designed and well-maintained housing in excellent neighbourhoods that you can rent for your lifetime, and without a huge impetus to move unless you choose to do so, including limits on unreasonable rent increases. In the Canadian context, the lack of such purpose-built rental has allowed condos owned by investors to fill the rental-housing gap, which is fundamentally unstable.

Yes, there are good policies in Canada that offer solutions that look past these myths. What if we saved the best sites in the best places in our cities for high-quality rental housing, and zoned them specifically for renting, as British Columbia has recently allowed? What if we prioritized making rental a highly desirable first choice, by design, by providing more construction loan-financing for purpose-built rental, as Canada Mortgage and Housing Corp. has recently introduced?

But too often, the failures we see in our housing market are by design. An absence of strong policy to ensure an accessible rental-housing market has felt like a policy in and of itself. The oft-affirmed notion that home ownership is an excellent way to accrue wealth is at odds with our desire, as a society, to easily access stable, high-quality, affordable housing. And with home ownership more and more unattainable for more and more people, policymakers and thought leaders need to stop promoting ownership to those who cannot afford it, and instead reorient our housing market toward high-quality rental homes.

We’ve made this mess through public policy. It’s only through policy that we can fix it. But first, we need to dispel the myths that have turned this mess into a tangled knot – because stories and faith alone don’t solve a crisis.

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