National Post (National Edition)
Time to build better housing policies
It's really hard and really expensive to buy a home in Canada today and governments ought to do something to make it easier. In fact, it would be hard to find another policy diagnosis that so many politicians would agree on. But when it comes to prescribing a solution, approaches diverge and no leader in Canada has been able to make meaningful progress on a fix, to the detriment of my generation.
There are a number of reasons we have not been able to crack this policy nut as a country. Many levels of government must work together (never easy), builders and developers in the private sector must play a major role (to the chagrin of the left), and perhaps most importantly, the two possible approaches on the table — focusing on supply or focusing on demand — are ideologically divergent and as on so many issues, the governing Liberals cannot seem to pick a lane.
Housing affordability tends to simmer as an issue, bubbling up in urgency when the housing market heats up and eye-popping prices drive homes out of reach for even more young people than usual. We are in one such moment right now so public debate has focused on the issue anew. But these moments only serve to intensify existing systemic issues and every new debate makes clear there are only two ways policy-makers can change the status quo.
On one side of the debate, conservatives and other market-sympathetic actors like builders and developers make the case that the solution is simple. Home prices are high because there is not enough supply to meet demand. There are too many buyers competing for too few homes so sellers control the market and can ask a king's ransom when they put a home on the market.
Why is supply constrained? Because of regulation and controls applied at various levels of government, bolstered by community-level NIMBYism and elected politicians too afraid to stand up to it. Conservative member of Parliament Pierre Poilievre described the guardians of these barriers to supply as “gatekeepers” in a characteristically fiery speech in the House of Commons just this week. Agree or disagree with what to do about this lack of supply (I happen to agree with Mr. Poilievre), it is a demonstrable fact that housing supply has not kept up with population growth in Canada.
On the other side of the debate, progressive leftists and some finance executives have struck an informal bargain to try to offer alternative solutions. They reject supply-side fixes for different reasons. The most charitable interpretation assumes progressives prioritize environmentalism over sprawl and some of the big banks are seeking to present policy alternatives a left-wing government would consider.
Four years ago, when Kathleen Wynne was running the province of Ontario, she brought in a tax on foreign home buyers and rent-control to try to cool prices, and various politicians in Vancouver have tried to do the same. More recently, the chief economist at RBC suggested that Canada should consider a capital gains tax on primary residences to try to cool the hot-again market. No doubt these measures did and would have some impact on prices. It is not unreasonable to assume that taxing a behaviour will limit it and that a less active market will lead to lower prices. I find this approach lacking because it is a Band-Aid solution that avoids fixing the source of the problem, but its proponents are at least presenting solutions that would lower prices and make some housing more accessible to some Canadians.
Unfortunately, neither those who want to create more supply nor those who want to use policy levers to dampen prices are running the country right now. The Liberal government has gone so far as to appoint a parliamentary secretary specifically tasked with tackling housing and urban affairs in Adam Vaughan, but has asked him to do his job with two hands tied behind his back. While the government has announced investments in affordable housing and strengthened the mortgage approval stress test, these measures have been drops in the bucket of housing affordability and the proof of their lack of impact is in the pudding. The costs of buying and renting have only gone up since the party formed government and the Liberals have shown no signs of entertaining serious, impactful policy that would reduce them.
Much as the Conservatives would like to convince us that the government would consider touching a sacred cow like the capital gains tax exemption for primary residences, there is no way a populist like Justin Trudeau would risk alienating so many of his core voters by negatively impacting the value of their homes.
Likewise, he and his government will not pressure their colleagues at the provincial and municipal level to alienate their homeowning voters by encouraging the development of more supply. Indeed, Ontario's Liberals are currently on the attack against Premier Doug Ford for his attempts to increase supply at the provincial level through ministerial zoning orders and other policy levers.
This inaction creates a major opportunity for Erin O'Toole and the federal Conservative party as they develop their policy platform. President Joe Biden has sought to play a role in increasing housing supply and development in the United States by tying municipal infrastructure funds to zoning changes that would increase housing supply, and the Macdonald-Laurier Institute recommended something similar for Canada in a 2016 paper.
While the current government may be interested in attracting new millennial voters to its coalition of support, it is more interested in keeping frequently-voting urban baby boomer homeowners in its coalition. As long as that remains the case, its focus on housing affordability will be a content-less communications exercise, and serious housing affordability policy will be fertile ground for its competitors.
HOUSING AFFORDABILITY TENDS TO SIMMER AS AN ISSUE.