Chris Selley: Sorry, the feds can’t build you a house

In Ottawa, the Liberals and NDP are at war over affordable housing policy. But only local governments can solve the supply problem If one goes a-Googling for proposed solutions to Canada’s affordable housing shortage, one will find the boffins mostly preoccupied with municipal and provincial affairs. They might call for more money from Ottawa, as Marc Lee did in a 2016 paper for the left-wing Canadian Centre for Policy Alternatives. But to actually spend it, to actually ramp up construction, they know there will need to be changes at the local level. The CCPA paper, focused on the Vancouver market, argued for “gentler forms of density” that might mollify militant NIMBYs, along with inclusionary zoning (i.e., a certain number of units are designated “affordable” in perpetuity) and progressive property taxation (i.e., the more your house is worth, the higher the rate). The details change as you navigate the political spectrum, but the focus does not. In a 2018 paper for the centrist C.D. Howe Insti- tute, Benjamin Dachis argued for revamping outdated zoning laws, reducing development charges to the actual infrastructure costs borne by municipalities, and reviewing restrictions on greenfield development. “Local governments must approve the construction of more homes, and at a quicker rate — be it by streamlining the building permit approvals process or making major changes to the city’s zoning bylaws,” Josef Filipowicz and Steve Lafleur of the right-wing Fraser Institute wrote in a recent op-ed. “Either way, city hall holds the key to cooling prices.” This may help explain why the affordable housing plan unveiled by NDP leader Jagmeet Singh this week is such a confusing muddle, to say nothing of the Liberals’ reaction to it: They’re promising to solve a problem that they really can’t. Singh’s goal, nothing if not ambitious, is 500,000 new affordable housing units over 10 years. Part of his plan to get there is to remove the GST from new affordable housing developments. And this seems eminently reasonable: If you want people to do more of something, you make it cheaper. The Liberals had proposed exactly the same in their 2015 platform. Now, however, high-strung Liberal housing and urban affairs critic Adam Vaughan is dead set agin’ it. He claims it’s “a recipe to bankrupt housing providers right across the country,” which is … a bit odd. As Jeff Morrison, executive director of the Canadian Housing and Renewal Association, dryly told Canadian Press, “I’ve never known any- one to go bankrupt from getting money.” The Liberals abandoned the idea, Vaughan argued, in part because they worried “affordable” housing developments might transmogrify into not-so-affordable housing developments, leaving the feds essentially subsidizing luxury housing. Politically, it’s something no party would want to be seen doing (though it seems like a pitfall that a competent government could avoid). But at the same time, new luxury condos aren’t a bad thing. Many Toronto renters, for example, are right on the economic line between the condo and traditional rental markets. (Your correspondent is one of them.) When one moves up, a less fancy unit comes vacant. If you give renters money, whatever else you might be doing, you’re driving up the market price of renting The other two items in Singh’s proposal are more suspect. With all but the sketchiest details still to come, he proposes subsidizing people who are spending more than 30 per cent of their income on rent. And he proposes doubling the first-time home buyers’ credit from $750 to $1,500. If you’re spending 45 per cent of your income on housing and you have rent control, then Singh might have good news for you. But if you give renters money, whatever else you might be doing, you’re driving up the market price of renting. Same thing when you give first-time home buyers more money: You’re increasing everyone’s budget by $750 or $1,500 or whatever, all of which goes to the seller. As UBC economist Kevin Milligan observed this week, Singh’s plan smacks of a “centreright” approach. He suggested a more naturally NDP plan would eliminate the home buyer’s credit and the exemption from capital gains tax for the sale of personal residences, and pour the resulting nearly $7 billion into building housing. (Lee’s CCPA study recommended almost exactly that.) But the fixation on home ownership, as opposed to housing per se, pervades Canadian politics across the spectrum. And as we’re seeing, it leads policymakers to some weird places. Rent or own, though, housing won’t get built in the quantities that cities like Vancouver and Toronto desperately need it until policies way down the chain from Ottawa change significantly. And those debates are often just as incoherent as the one in Ottawa. One of the Ontario Liberal government’s last moves was to extend rent control to every unit in the province — a move that overwhelmingly benefited relatively wellto-do people who live in nice rental condos (your correspondent is one of them), and that could only discourage new rental development. And when Ontario’s new Progressive Conservative government decreed all new units would henceforth be free of rent control, which could only encourage rental development, most affordable housing advocates howled. The demand is here, and it is massive. What we need is supply. To get it, cities simply have to let it happen. Everything else is hot noise.