Sean Fraser, Minister of Housing, Infrastructure and Communities, prepares to speak during an announcement outside a rental housing building being developed by the University of British Columbia Properties Trust, in Vancouver, on Aug. 16.DARRYL DYCK/The Canadian Press
There needs to be a lot more honesty in Canada’s debate around housing. Politicians pretend they can somehow address affordability while also protecting the property values of existing owners. At the same time, the term “affordable housing” has become increasingly elastic, stretched to meaningless. And the falsehood that every middle-class Canadian can have a house and yard persists, a myth that leaders and pundits are quite happy to push.
The reality is that making homes affordable means they must, well, cost less. That’s just math. If the new federal Housing Minister, Sean Fraser, believes supply can be added without affecting current values he is either peddling voodoo economics or signposting a major new federal role in subsidized housing. And while he bemoaned in a follow-up media appearance that Ottawa had for decades abandoned this file, the Minister did not take the opportunity to announce a significant policy shift. So, his original comments ring as a disingenuous attempt to reassure homeowners.
To be blunt: if you’ve ridden Canada’s housing boom you are fortunate, not in need of special government attention. Even though homeowners tend to vote, giving them the ear of sympathetic politicians, they have no right to never-ending real estate price gains.
A balancing act Ottawa might plausibly hope for is income to rise more than home prices over several years, thereby slowly reducing the imbalance between earnings and housing costs. In Canada the price to income ratio has grown 35.2 per cent since 2015, compared to 20.2 per cent across the OECD as a whole.
Even just a steadying of home prices could over time allow that ratio to moderate to something more affordable.
Which raises another question: What does “affordable housing” now mean? Developers and city planners use a simple rule – no more than 80 per cent of market rates – but where does that leave someone looking for a place to live?
Consider someone purchasing their first home in Vancouver. The average cost for a condo last month was $814,000. Cutting that by 20 per cent would bring it in line with prices in early 2021. Was the market affordable then?
Or consider a prospective lower-income renter in Toronto. Scanning the offerings turns up one that might once have served such a person. It has a good location but is in a basement, measures just 450 square feet and, at least according to the photos in the listing, admits natural light only through the door. It costs $1,900 per month.
Would anyone argue that if the unit cost $1,520 instead that would make it affordable? To cover even that lower price without exceeding the recommended 30 per cent of pretax income on housing would require the renter to earn about $61,000.
Coincidentally, $61,000 is just under the median household income in central Toronto. If roughly half of local residents cannot reasonably pay for a small “affordable” apartment in a basement, the definition needs to change.
Housing starts in Canada fell 10% in July: CMHC
Also in need of a change is the rhetoric around the country’s housing future. There are some places in Canada where single-family homes with yards remain, at least for now, reasonable goals for the middle class. But in many of the country’s cities they are far out of reach. The young mayor of a township in Waterloo Region recently garnered media attention for noting that she couldn’t afford a local house on her $90,000 income and was living with her parents.
Sprawl is not the answer. More homes need to be built, but the future is density. Pushing communities ever-outward carries environmental costs, saddles municipalities with long-term financial liabilities and ultimately hits a wall anyway once commuting distances become untenable.
So when Ontario Premier Doug Ford defends building on the Greenbelt by saying that the alternative is not adding homes, that’s a false choice. Plenty of homes can be built closer in. And when economists argue that Canadians “really want” a suburban home and a leafy yard, that’s disingenuous. A stated preference that does not take into account budgets or externality costs is meaningless.
Everyone needs a reality check. Homes aren’t guaranteed revenue generators, the middle-class expectation of owning a suburban house belongs increasingly to a bygone era and even so-called affordable places to live are priced beyond the reach of many. Most of all, politicians need to acknowledge these hard truths.