Much has been written in recent months about the exploding cost of homeownership across Canada in recent months. Once a problem mainly confined to major urban centers such as Toronto and Vancouver, now even more outlying areas are experiencing sharp increases in house prices, driven by pent up COVID savings and a desire for more space from those able to work remotely. Amongst the culprits who have been fingered in this drama are speculative developers, condo-owners and, of course, wealthy overseas buyers. Though there are indeed reasonable questions about the use of real estate as an asset class by overseas buyers, there seems to be a continuing headache in such “global cities” like New York and London, and what various levels of government might do in order to tamp down such speculative activity. The federal government has pledged to introduce a modest, targeted vacancy tax in its recent budget, though, it is difficult to imagine such a small measure will make much of a difference on the overall costs.
However, it may also be instructive, before rushing towards greater involvement, to examine all the ways in which government policy already shapes decisions regarding house building and buying. The post-war dream of mass homeownership, filtered deeply into the Canadian psyche, is not in any sense a natural or inevitable result of market dynamics. Indeed, it is underwritten in a variety of ways by public money, though these mechanisms remain somewhat obscure. It is clear, though, through their overall net effects, that they tend to encourage the overbuilding of individual houses in ways that are both ecologically damaging and drive up the cost of the overall housing stock. These policies are driven not by a desire to ensure good quality, affordable housing for all, a sensible goal, but rather in large part by cultural/ideological preference for private homeownership above renting. A responsible government would, before introducing new initiatives with the goal of reigning in costs, examine and eliminate perverse incentives in this realm which previous have put in place and which continue to contribute to an overheating market.
Who should housing policy be for?
Something to keep in mind throughout any discussion of housing is that there are approximately 235,000 individuals in Canada who lack stable shelter arrangements. Patchwork funding plans, lacking coordination from the various levels of government and other involved actors, have contributed to a lack of progress and, indeed, backsliding on these issues. Municipalities, strapped for cash and barred by provincial legislation from instituting innovative revenue streams beyond property taxes and service fees, are often reluctant to dedicate funds to strategies to definitively end homelessness in their borders. This is both for lack of sufficient funds to carry out these goals and because they, not unreasonably, worry that pursuing such policies without higher-level coordination will merely displace rather than solve housing issues. In other words, it is the sort of issue that, due to population mobility, fundamentally requires a national-level solution which has not been forthcoming. This has been the case since the elimination of National Housing Strategy funds by Paul Martin’s March 1996 budget and the subsequent elimination of dedicated housing ministries at various provincial levels. The federal government has, since 2015, reestablished a Housing Strategy at the national level and dedicated some funds to this purpose but this has not led to the reestablishment of purpose-driven housing ministries in those provinces where they were eliminated.
What was not, however, eliminated from government balance sheets were the various middle and upper class housing policy breaks which continue to this day. Canada’s habit of subsidizing, or heavily insuring, homeownership began in a well-intentioned fashion with housing credits and mortgage insurance for veterans of World War II, and was later expanded to the general population in 1954. At the time, with costs generally low and a surfeit of land to develop, not to mention a lack of awareness of the environmental problems caused by commuter C02 emissions, this led to the development of the various suburban communities of Canada. No doubt many of these communities flourished and many people were appropriately housed, but the tendency over the years has been to pile new subsidies and attractions under the CMHC’s swiss army knife of incentives. To name just a few: the Assisted Home Ownership Program, the Canadian Homeownership Stimulation Plan, the Registered Home Ownership Savings Plan, and the Mortgage Rate Protection Program. A reasonable question should be asked if all the money that goes into these initiatives is particularly well-spent, given that homeowners are considerably wealthier on average than renters. Consider that the federal government, in a welcome move, earmarked about $2.5 billion in the 2021 budget for various housing initiatives, but that it also forgoes about $8 billion in tax revenue from owner-led house sales due to a capital gains tax exemption on these properties (a number that is likely to only grow in coming years due to the sharp recent increase in house prices and is in addition to other homeowner subsidies). This is but one example among many, without even getting into the various ownership preferences, such through property tax breaks, at the provincial level. Clearly, something is deeply amiss with our priorities when we give more resources to those already having them and leave a few crumbs for the worst off, all the while doing little to address the urban affordability issue in general terms.
Solutions Are Available
There are some relatively easy fixes which could ease housing pressures and increase affordability without a total policy overhaul. As many organizations in Toronto have been pushing for years, provinces could allow municipalities to adopt inclusionary zoning provisions or similar affordability mandates for new construction. Overly broad restrictions on construction, which may manifest themselves in poorly-designed zoning, overly broad historical designations and the like, should be eased to allow for new construction to increase overall housing stock. Related to this is the considerably uglier question of public resistance to the placing of social housing units in neighbourhoods where they have not traditionally been. This is a considerably trickier issue to navigate, though positive experiences with mixed-income developments in both Canada and the US in recent years should be able to put such unfounded fears to rest. At the most drastic level, we could make like Berlin and impose rent caps, if it came down to it.
Ultimately, though, the problem lies at a deeper level in the preferences the current system of housing subsidies designs and maintains. There is nothing wrong with homeownership, or the aspiration towards such, but when policies designed to encourage it drain substantial public resources which could be better spent elsewhere, there is clearly an issue. So too is there nothing wrong with being a life-long renter (as is common in many European nations), and we should not privilege one choice over the other. All the money the Canadian government now spends subsidizing the suburban lifestyle aspirations of the middle class would be much better spent in genuine action on affordable housing development, even setting aside the immense savings on hospitals and corrections which have been demonstrated from moving towards Housing First approaches to homelessness. Make no mistake, such a move would require a well-designed national strategy in order to be truly effective, but at the very least we could stop spending money in ways that do nothing but make the problem worse. In the hole we’ve dug ourselves into on housing, in other words, the first thing to do would be stop digging.
The views, thoughts, and opinions expressed in this article belong solely to the author, and do not reflect the views of Conversationally Speaking Magazine.