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Canada’s in a prolonged housing crisis. There’s one trick to getting out of it: Build more (non-market) housing

Because the commodification of housing forces people out of the market, a massive investment in non-profit housing is essential

Canadian PoliticsEconomic Crisis

Each of the major national parties have housing plans that purport to address the housing crisis through a mix of supply and demand side measures. Photo by Scott Webb/Unsplash.

The housing crisis is a top issue during the federal election—a contest that 60 percent of people say is “more important” or “way more important” than the 2019 race. Housing is a top issue for so many of us because it affects everyone, though not in the same way. Those who profit from commodified housing and high prices share different material interests than those who do not, just as those whose retirement is bound up in real estate have different material interests than those who rent. Put another way, high prices serve some and hurt others. The interests of one group are not the interests of the other.

Politics is meant to be the way by which we resolve competing interests. To talk about the housing crisis and to take a position is to declare an interest and to choose a side: a desire to profit or to secure access to a basic human need; a desire to preserve the status quo or a desire to transform it. The primary lens through which I view the issue in this article is, in each example, the latter.

In August, 15 percent of respondents to a poll by Nanos Research were concerned about whether they could afford to cover their immediate housing costs. Throughout the pandemic, housing prices have continued to rise—up 38 percent year-over-year in June—while an analyst-predicted slowdown has meant persistent high costs and supply issues. According to the OECD, Canada ranks among the top states for both nominal and real housing prices. We’re also near the top in price-to-income ratio, meaning housing is unaffordable for locals. What’s more, the National Bank of Canada has found that, during a time of low interest rates, “Mortgage payments now engulf 45% of income for a representative household.” Imagine if rates were higher.

In 2020, Statistics Canada reported “almost one-third of Canadians households live in an inadequate or unaffordable or unsuitable dwelling,” though added “but only one-tenth are in core housing need.” Only one-tenth sounds like quite a bit, but either way the takeaway is clear: we’re in a sustained crisis that’s affecting millions of Canadians, especially the poorest among us. Vacancy rates are low. Renters, especially in lower income quintiles in many major metropolitan areas, are up against the wall.

Responsibility for the housing crisis and its resolution is shuffled around between municipal, provincial, and federal politicians who blame one another for the problem. Voters, however, are not constrained by federalism in their judgements, which lends a particular incentive to federal politicians who try to make it seem like they can solve the housing crisis—even though they cannot do so alone. Either way, they aren’t really trying. As Max Fawcett wrote in his assessment of the housing policy offers this election, “None of the major parties are acting with the story of urgency that’s required.” Nonetheless, the national government can make a difference: the question is how and for whom?

Each of the major national parties have housing plans that purport to address the housing crisis through a mix of supply and demand side measures. The Liberal Party has promised to “build, preserve, or repair an additional 1.4 million homes in four years.” They’re also promising a tax on flipping, too, a ban on blind bidding, and a municipal accelerator fund. The Liberals have also gone with a rent-to-own scheme, which is at best a gimmick and at worst a scam. They also intend to launch a foreign ownership ban for two years while doubling the first-time buyers’ tax credit and launching a TFSA-style “First Home Savings Account” for the under-40 crowd. So, as David Byrne might say, a recipe for burning down the house or, as the cliché goes, pouring fuel on the fire.

The New Democratic Party is focused on building affordable housing and promises 500,000 units over a decade. They’re also using the language of preservation, promising to “preserve” 1.7 million units while also doubling the Home Buyer’s Tax Credit, imposing a tax on foreign buyers, and bringing back 30-year mortgages—but just for entry-level purchases by first-time owners. The NDP is also promising a subsidy of up to $5,000 for lower-income renters who spend 30 percent or more of their income on rent.

According to the National Bank of Canada’s Q2-2021 Housing Affordability Monitor, housing affordability worsened across the country by the most in 27 years in the second quarter of this year, marking the sharpest deterioration since 1994. Photo by Jacob Mathers/Unsplash.

The Conservative Party is pledging a million new units in three years. They’re also promising to open federal real estate holdings for conversion into rental homes or new dwellings. Like the Liberals, they’re proposing a two-year foreign ownership ban. For developers, the CPC is promising capital gains deferral incentives. For buyers, they have promised to not introduce a capital gains tax on the sale of a principal residence while bringing in a 7-to-10 year mortgage option. They’ll also—and this is notable—make federal municipal funding for transit contingent on increasing housing density along transit lines.

The Green Party is promising 300,000 new units over a decade for low-income earners along with a new federal minister of housing, amendments to the Canada Mortgage and Housing Corporation’s mandate to support a mix of non-profit and co-op housing, and, like the rest, measures to limit foreign buyers.

Will any of these ideas be enough to make a dent in the housing crisis? One way to find out is to ask the parties how much they hope to see housing prices come down. Of course, you won’t get a straight answer. As Paul Kershaw, founder of Generation Squeeze, put it to CBC, “We haven’t decided in this country whether or not we think that rising home prices are good or bad.” The federal parties implicitly seem to think they can have it both ways: high prices for owners, low prices for buyers. They can’t. As Rob Carrick notes in the Globe and Mail, the parties won’t admit that “only a big price drop will restore housing affordability.” With the financial stability of so many Canadians tied up in real estate, it would be political suicide to try. Ultimately, the interests of the rentier and owner classes carry the day. But that doesn’t have to be the case.

What is to be done? Daniel Oleksiuk, a director with Abundant Housing Vancouver, sums up the problem well: “We have a housing supply shortage,” he says. He looks at the party offers and likens them to a game of musical chairs in which the rules—permitting rougher pushing imagined as demand-side interventions—benefit some at the cost of others. Measures that drive up demand undermine affordability. There’s a solution to that. “We could just be adding chairs,” he says.

There’s more to the matter, of course. “Arguably, the most important policies are property taxes and municipal land-use zoning, which are municipal and provincial,” says Oleksiuk. “But the federal government is involved in housing policy, and the most important federal housing policy in the country is one that no one’s been talking about, which is the principal residence capital gains taxes exemption.” He says the tax break costs the state over $7 billion dollars a year, or double what the federal government spends on housing affordability. “So, we’re spending twice as much on housing unaffordability as we are on housing affordability.” As long as the state implicitly and explicitly privileges the commodification of housing, and as long as it treats housing as protected investment, it will continue to drive up housing prices.

Central to managing the supply side of the housing crisis is providing housing that people can afford beyond the dictates of the market. Social housing, which may be private or public depending on the model and jurisdiction, but which is non-profit, essential. We used to build a lot of it. Then we didn’t. “In the 1970s, we used to build about 30,000 units of social housing [a year],” Oleksiuk says. “That went down, gradually, starting in the late 1980s down to almost nothing after the Chretien-Martin cuts in the 1990s.”

Alex Hemingway, a senior economist with the Canadian Centre for Policy Alternatives, thinks about the need for more supply in a similar way. “Part of the way I’ve been looking at the platforms,” he says, “is to think about how they address three issues: two on the supply side and one on the demand side. The first and most important is that we need to massively expand investment in non-market, affordable housing across the country. In addition to that we need to expand the overall stock of housing.” No party is offering enough of a plan to address the affordable supply need, even if the NDP is closest. All parties, however, Hemingway notes, are “short on details.” Nonetheless, the takeaway is “there is no way to address the housing crisis without major new investment in dedicated publicly-funded, affordable housing.”

The focus of the housing debate must be supply along with some key demand-side interventions to support an all-out housing strategy. But the bottom line is that we need more units. Because the commodification of housing forces people out of the market—or into a market that leaves them struggling to survive—a massive investment in non-market housing is essential. For scale, the Communist Party of Canada is calling for a million units of affordable social housing while the advocacy coalition Vote Housing’s platform includes “a minimum of 50,000 units of supportive housing over a decade” and “a minimum of 300,000 units of deeply affordable, non-market, co-op and non-profit housing over a decade.”

The federal government has policy levers it can pull to address the issue from the supply- and the demand-side and they should pull them, including working with provinces and municipalities on zoning issues that prevent building, funding builds, and taxing capital gains on sales. Federal parties can and should forego boutique demand-side promises that may be good politics but make for lousy policy, and they should reduce incentives that drive private buyers to treat homes as commodities or retirement plans. The housing crisis is not a policy crisis—it’s a political crisis. We know what must be done. We just need politicians who’ll do it. Whether the 2021 election will return enough of them to make a difference is to be seen, but it seems unlikely, though that is no reason to stop fighting for a solution to the problem of fulfilling a fundamental human need.

David Moscrop is a contributing columnist for the Washington Post and the author of Too Dumb for Democracy? Why We Make Bad Political Decisions and How We Can Make Better Ones. He is a political commentator for television, radio, and print media. He is also the host of Open To Debate, a current affairs podcast. He holds a PhD in political science from the University of British Columbia.

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