Canada’s Housing Challenges
Hon. Lisa Raitt, Coalition Co-chair
First published in the Albany Club’s ‘CONNECT’ magazine - Winter 2023
Canada’s housing crisis is one of the big risks to our collective economic prosperity.
Inflated out-of-reach home prices - and massive debts that come with these crazy valuations - are a major vulnerability to our financial system. They will be an enormous deadweight on our economy for years to come as households pay down all this debt. They will also be a constraint on our ability to grow our labour force to meet Canada’s needs.
The growing realization that we may be living in a world of permanently higher interest rates only adds to the sense of financial malaise for many Canadians. Former Prime Minister John Diefenbaker’s vision championed fairness, equality and inclusion for all Canadians. The current housing crisis is at odds with these important values.
Canada is one of only four major economies where total household credit - totalling almost $3 trillion - exceeds our annual GDP. The burden won’t be equally shared as high home prices and rising interest rates will hit young families and poorer Canadians hardest. Debt, as a share of disposable income for Canadians in the lowest income quintile, is at almost 320 per cent - more than double the ratio for those in the top 20 per cent of earners.
Look closely and you can see the limitations of a failed economic growth model too reliant on cheap money and real estate wealth and neglecting real investment and some underlying fundamentals. The result is a big mess on our hands - with no easy solutions. But pointing fingers isn't going to build any new homes. It is incumbent on us to find answers. We have no choice. Affordable housing is too critical to our collective well-being to ignore.
The biggest challenge is the enormous disconnect between the scale of the problem – which is massive - and the nature of available solutions, which are mostly incremental options offering marginal gains. There are no silver bullets. The good news is that a consensus is forming across political stripes on ways to address this crisis. This is a great starting point.
A conservative approach recognizes that efforts need to be made to lower building costs and ensure the industry has enough construction trade workers to ramp up the supply of new homes. Municipalities need to facilitate development rather than prevent it. Our immigration system needs to be better aligned with housing supply. Speculators need to be pushed out of the market and real developers brought in. Better coordination between different government jurisdictions is needed.
We need to accept that hard choices have to be made. As economist Mike Moffatt described it, we need nothing less than a war-time effort to get the job done.
I am optimistic. I am learning there are a lot of smart people working and thinking about the problem and proposing creative solutions. I will highlight a few broad principles I see as critical, but they are hardly exhaustive. There is a rich pool of policy ideas emerging from the crisis.
Local governments need to be more accommodating through permitting and zoning with an emphasis on density, while keeping upfront development fees as low as possible. Tying federal infrastructure funding to new construction – as Pierre Poilievre has proposed - makes a lot of sense as does rewarding cities that exceed targets with additional bonus funding. Provinces can also mandate targets for municipal construction.
Local governments have legitimate concerns about the cost of building and maintaining infrastructure needed to support growing populations and new developments. Sharing this burden should be top of mind for provincial and federal governments.
Fine-tuning works. Let’s not get too overwhelmed by the scale of the problem. Policies can be calibrated to meet changing conditions and policy makers need to be more adept at rolling with the punches. The only rule here is there is no room for dogma.
In the long run, we have a supply problem. But any immediate relief will come from the demand side. This will include better short-term management of population growth, knowing it is needed in the long-term. Universities and other post-secondary institutions need to take responsibility for housing if they ramp up their student numbers.
Finally - perhaps a more controversial idea. We may need to re-calibrate our expectations around housing. It is an unsatisfactory and unfair conclusion - but it is also a reality. This could include everything from how we define affordability to changing our tastes and preferences – whether becoming more amenable to pre-fabricated homes or increasing our willingness to rent. Owning that detached 3,000-square-foot home with plenty of yard doesn’t need to be the benchmark anymore.
At the Coalition for a Better Future, improving living standards for all Canadians is one of three key pillars of prosperity we talk about - and housing is central to how people perceive quality of life. A home is not only a basic need and fundamental right. It is also a major component of wealth for homeowners and a big chunk of their expenses, whether making rent or mortgage payments. Housing is also a source of a lot of economic activity – from construction to banking to real estate transactions.
As Conservative decision makers propose policies to meet Canada’s housing needs, the principles Diefenbaker espoused need to be kept in mind. Affordable housing leads to fairness, equality and inclusion for all Canadians.
