Governments missing the mark on affordability

Canadian governments at all levels have bungled the issue of housing affordability. Their policies drive up the cost of housing and make it difficult to accommodate new immigrants and people forming their own families. Instead of expanding supply, government policies artificially restrict demand. Most of their efforts focus on people with low incomes, but even there they are treading water, spending billions of dollars for little result.

A properly functioning housing market needs an upward flow. Ottawa lawyer John Dickie, an expert on the rental housing market and chairman of the Eastern Ontario Landlord Organization, explains that lack of new supply makes it difficult for renters to move up the housing chain to better apartments or starter homes. That, in turn, makes life difficult for low-income renters because the apartments they could afford are occupied by people who could rent or buy something better but can’t find a place.

Coun. Mathieu Fleury, chairman of Ottawa’s community housing corporation, has a similar analysis. “Until we see private-sector rental apartments being built in massive quantities, the vacancy rates won’t shift to free up units and it puts all the pressure on the not-for-profit sector.”

Housing unaffordability is a problem that can be fixed, but it will require new thinking by government. Politicians need to get their hands out of the pockets of people buying new homes and renting new apartments by reversing policies that push up prices and reduce supply.

A properly functioning housing market needs an upward flow.

For the federal and provincial governments, it means cutting or eliminating sales taxes on lower-priced, affordable housing. Sales-tax rebates reduce the sting of these taxes, but senior levels of government are still taking big money from people trying to put a roof over their heads. Basic groceries are not subject to HST, so why should basic shelter be taxed?

Ottawa needs to get out of the mortgage insurance business and leave it to banks to decide who is eligible for a mortgage. Canada Mortgage and Housing Corporation takes billions of dollars from home buyers and gives them nothing in return.

Municipalities have a huge role to play in housing affordability. Development charges can add as much as $35,000 to the cost of a suburban home, and the fee goes up every year. Spreading the costs of growth across the whole tax base instead of dumping it all on new home buyers and the renters of new apartments would dramatically reduce housing prices.

Government should not lose its focus on helping lower-income people with housing, but it needs to do so rationally. There is a role for government in building and running supportive housing, but it doesn’t need to own apartments for people whose only issue is money, Dickie argues. The private sector can do that. Increasing the number of people who can afford market rents with some government help boosts demand, which in turn will increase supply.

Government should sell housing it owns and switch to a broad rent subsidy. Not only is this more cost-effective, it is fairer. In Ottawa, people can wait years to get government-owned rent geared to income housing. Rent supplements help more people quicker.

Canadians should expect housing policies that will benefit people broadly, not just help a tiny percentage of those in the lowest income group. This is a big issue that requires a big solution. Ottawa’s new council should bring new thinking. Ontario’s provincial government shouldn’t be fettered by the past. And finally, this fall’s federal election offers a real chance to demand that governments do better.