Where The Parties Stand: The Housing Crisis

Intro One week from today, most Canadians will cast their ballot. Many of them already have. And while elections can have narratives and horse races and scandals and wild rides in the polls, at their core, they’re about one thing: choosing the path that this country takes on the issues that matter most to you. And the only way you can really do that is if you’re informed. And by that, I don’t mean angry or biased or hoping your team wins. But informed about all the major parties plans on matters that will impact your life. That’s exactly what this week on The Big Story is about. First, we asked our listeners for the issues that will most decide their votes. We took the top five. We found the experts who have immersed themselves in the nitty gritty details of the various platforms and who can explain to you which party plans to do what, why they plan to do it and what it will actually mean. So we’ll start today with a crisis that has being a crisis for a while now, and will get steadily worse unless we act—not climate that’s later this week. Today, housing: availability, affordability accessibility. Does any party have a plan that will make it easier for you or your children or your friends to own a home? Does such a plan even exist? And if it did, what would it look like?

Jordan I’m Jordan Heath-Rawlings, this is The Big Story. Mike Moffatt is the senior director at Smart Prosperity . He is an assistant professor at Ivey Business School in London, Ontario, and I think it’s fair to say he’s done an exhaustive amount of housing research over the past few years. Hello, Mike.

Mike Hello.

Jordan Maybe. Can you start by? I don’t even know. Is there a way to succinctly sum up the housing crisis that we face in this country right now?

Mike Well, it’s a crisis. It’s absolutely a crisis. It is a regional one we do see in the Prairie provinces, house prices have remained fairly reasonable. I mean, they’ve gone up, but not an extraordinary amount, and you could still afford a house on sort of a middle class wage. But across the rest of the country, we’ve seen house prices go up by about 40% to 45% in the last year, and even before then, they’ve gone up exceptionally high. So we’ve got parts of Southern Ontario which have seen prices almost triple in the last six years. So this is an affordability crisis. It’s a very difficult situation for any person who doesn’t currently own a home and would like to get into the market.

Jordan When we surveyed our listeners on the issues they needed broken down for them ahead of casting their ballot, this was number two behind climate change. So if you want a sense of how concerned people are about this. That makes me want to ask if we’re reaching a tipping point in terms of the public consciousness around just how bad this has gotten. And if it’s finally becoming a pure one issue voter type thing for a lot of people.

Mike Yeah, I really think it is. We’ve had high housing prices in Canada before, but they were highly regionalized. They were a Toronto and Vancouver problem. But over time, it’s spread to other parts of the country, to Southern Ontario, we see parts of it in Quebec. And since the crisis, we’re now seeing high housing prices in places where you wouldn’t normally see it or expect it like Northern Ontario and Atlantic Canada. So absolutely this does seem to be a top of mind issue for people. It’s something if I’m in line getting coffee as much as you can do that these days, it’s what you hear people talking about. Absolutely. I think this is a top of mind issue where people see that prices have gone up 40% in a year and go, ‘okay, you know what? This isn’t normal’. There’s something going on here.

Jordan In terms of who’s got that as a top of mind issue. What do we know about the demographics of people who are voting on this issue? Because I would assume that it is young people worried that they’re not going to be able to afford a house, and that, of course, leads to the charge that, well, young people don’t vote. And maybe that’s why it’s not being taken seriously. But do we know who’s really pushing this agenda?

Mike We don’t. Unfortunately, I haven’t seen great polling on this. Now, I’ve spent a few years doing housing work, and part of what I’ve done is just had a lot of conversations with people as they went into the space. I’m trying to understand it better. So that’s with home builders, with real estate agents and just a lot of ordinary Canadians, mostly in Ontario. And the one thing that surprised me in these conversations was that the group angriest about the current situation often isn’t millennials. You would think it would be 20 something voters who couldn’t afford a house that would be most upset, and they almost seem resigned to their fate. They’re not happy about the situation, but there’s a sort of belief that, well, nothing’s going to change. Things are how they are. So we’ll just muddle through. I find that one group that is the most angry about it tends to be people about 55 to 70 who actually own homes, and they’re angry for I would say three reasons. Often they have a 20 something living in their house, living in their basement that they would like to go see, get an apartment or a condo or something. Another is that they had to loan or give their kids sometimes as much as $100,000 for a down payment for a house. So they’re not happy about that. But I think the biggest group that’s most upset is grandparents. We’re seeing people have to move 100, 200 kilometers away to afford a house. So now grandma and grandpa don’t get to see their grandkids except on FaceTime and Christmas, and they’re really upset about that. They would love to have their kids and their grandkids living close by, but they just can’t because houses aren’t available.

Jordan So let’s kind of get into the policy then. Just looking at recent history, whether it’s the current Liberal government or even maybe the past years of the Stephen Harper conservative government, what measures have federal governments taken or promised to take on the housing issue and have any of them worked to any degree?

Mike I would say largely not. I think in defense of both of those governments, we weren’t quite at this sort of crisis level before. But what we’ve seen from the past few governments is some building of social housing, like really sort of focusing on the low end of the market and that’s both the Trudeau government and Harper government did get some houses built that way. But a lot of the focus has been on what I called the demand side. So helping first time home buyers put larger down payments and that kind of thing. And I’m sure it’s helped some people get into homes, but Ironically, it’s kind of made the situation worse. What we’re seeing across Canada is often three, four, five bidders for every home. I talked to a real estate agent who sold a townhouse where there were 75 bidders. So helping those bidders through these first time home buyers credits and those sorts of things doesn’t necessarily get more people into homes. It just allows people to make even larger bids, which drives the price up even further. So our whole way at the federal level of dealing with the housing crisis has been somewhat backwards.

Jordan before we get into the parties’ proposals themselves. As you look across the country, and you’ve already mentioned that it’s a regionalized thing. Is there any problem that keeps popping out region to region, city to small town that seems common?

Mike Well, I think it is just that spread. This sort of started as a Toronto and Vancouver issue and has now spread and spread and spread to the point in which it’s occurring across the country again outside of Western Canada. But you also wonder how long that’s going to last? Are we going to see at some point more people moving to Winnipeg or Calgary or Edmonton and start to drive those house prices up. So it’s again just kind of flowing across the country. We do have these few markets that are still relatively affordable. I won’t say they’re affordable, but I think that’s what what we’re seeing is just this spread. And if this continues, I don’t think there’s going to be any affordable markets left in the country.

Jordan Well, let’s get into what might change then. And let’s start with the Liberals. What are they promising to do now? And how is that different from what we’ve seen from them the past six years, if it is different, I don’t know.

Mike Yeah. So I think from all the parties, we’re still seeing the demand side, first time home buyers, credits and incentives and those sorts of things which I think are helping contribute to the problem. But from all the parties, we’re starting to see an extra focus on the supply side, which I think is fantastic. One thing that the Liberals are doing that is particularly interesting is this $4 billion they are putting towards a housing accelerator. And the idea there is it’s a pool of funds that would help municipalities modernize their zoning and planning systems to get more houses built in our city. So I think it’s an untested model, but I think it could have a lot of promise.

Jordan What about the Conservatives? How are they planning to approach this?

Mike So similarly, again, they have sort of demand side issues, but they also have a supply side one. So there’s a couple of interesting things that they’re doing. So one is unlocking federal land. So the federal government owns a lot of land, some of that is suitable for housing. So they’ve made a commitment to unlock some of that to allow housing to be built. The other thing that they’re doing is they’re noticing that the federal government gives a lot of money to municipalities to build transit. So they’re saying that they’re going to put more strings attached to that funding, telling cities that, hey, if we’re going to give you money to build a subway, to build a BRT or LRT, you need to make sure that there’s enough housing on those lines to sort of justify that expense. So the Liberal approach, the $4 billion is a bit of a carrot. The conservative approach with this transit funding is a bit of a stick. But they both get to the same thing where they’re trying to convince municipalities to get more houses built in cities.

Jordan And what about the NDP?

Mike The NDP are focused not as much on the market rate housing as they are on the lower end of the market, the social housing, affordable housing. So they’re talking about spending $22 billion, which is an awful lot of money, to build they’re saying up to half a million housing units over the next decade across the country. If they’re able to do that it would certainly help. So their focus is on the supply side. But it’s a different end of the market than the Liberals and Conservatives.

Jordan When you look at all the research that you’ve done across the country, and I know, particularly in Ontario. And then you look at these proposals, assuming that they’re genuine and that the parties will keep them, which one has the chance to make the biggest impact to one of our listeners? Let’s say to one of those millennials who is resigned to the fact that they will never own a home.

Mike so I don’t think any of these go far enough. I think there are an improvement on what we saw in 2019, but I would say none of them are going to be the sort of transformative change that we need. I think of all the sort of policies I think the Liberal one, the $4 billion housing accelerator has the most upside to it. It has the most potential to really get houses built, but it’s also a very untested model. So I would say that Conservative and NDP plans will certainly get more houses built. The Liberal plan is a bit of a wild card, but it has a lot of potential, and that’s always the issue with doing something new and untested. It’s not entirely clear how well it would work, but it’s a very interesting idea.

Jordan One of the things that I wanted to ask you comes from a listener who wants to know if any party intends to start taxing capital gains on the sale of a principal residence.

Mike No, that’s essentially the third rail of political promises in this country. Now, the Liberals have put into play something called a house flipping tax that if you own a home for less than a year and sort of flip it and there’s no sort of justification for it, like you got to a new job or there is a divorce or death in the family, that kind of thing, then you would have to pay a special tax. But that’s a lot different than a capital gains tax on a property. I can’t imagine any party will ever go there. It just would not sit right with Canadians.

Jordan Would it actually make a difference, though? It’s a pretty radical solution.

Mike It might, but I don’t think it gets to the core of the problem. I think the core of the problem is that we’re not building enough homes for everyone. So if we look at Ontario in particular, Ontario used to grow by about 100- to 120,000 people a year. Over the last five years, at least before the pandemic it has started growing by 200,000 people a year. But we didn’t really change the rate at which we started building homes. So that’s the reason why we’re having three, four, five bidders for every seller of a house. I don’t think a capital gains tax would change that. It might get some speculation out of the market, perhaps, but I don’t think it solves the core underlying issue. It’s just that we don’t have enough homes for everyone in the province or in the country for that matter.

Jordan In terms of these solutions designed to increase supply, how much or how little cooperation from provinces and for that matter, municipal governments would be required for these things to actually happen. Because one of the things we keep running into doing these issue based episodes is, ‘that’s a great proposal, as long as the provincial government agrees to spend it the way the Liberals or whomever want them to spend it’.

Mike So the bottleneck here isn’t the province so much. Though, there’s a lot of things that the province could do. In Ontario, I would love to see all the parties have fairly robust housing platforms in the next election. The bottleneck is more municipalities and municipal rules, and I think that’s going to be an issue for all the parties. So when you look at the NDP and their affordable housing plan, we’ve had issues across the country where we’ve had funds allocated to affordable housing, there’s plans for affordable housing, and then it gets caught up in a variety of municipal rules. This has been a big issue in Vancouver, where the city of Vancouver is trying to build affordable housing and actually getting caught up by the city of Vancouver’s home planning rules. There was a story in Toronto that something similar. And same with the conservative and the Liberal approach. These sort of carrots and sticks are designed to get municipalities to change their way, but absolutely, that’s going to be a big barrier if all of these regulatory levers are left in place, that make it impossible to build new housing. There’s really not much the federal government can do. So it’s got to find a way to get the municipalities to change some of their planning processes.

Jordan How much of that change in municipalities has to come from the grassroots level? Again, I’m speaking of Toronto because that’s where I live. But I know it’s not uncommon. Every place in Canada, when you propose to build more affordable housing, you run into people who don’t want it built in their neighborhood.

Mike Yeah. Absolutely. So I think there is a couple of things. The first one, there are these sort of zoning variances that it would help if local neighbors would sort of fight for this. Say: ‘You know what? We actually do want this in our neighborhood’. Right now that doesn’t happen. You get the sort of local opposition to projects. But another thing that needs to happen is just to change in the rules. When you build something new or renovate something, sometimes it has to go through these processes, and sometimes it doesn’t. So I’m in Ottawa right now. If I wanted to tear down my house tomorrow and build an absolute monstrosity of a house that doesn’t fit in with the neighbors at all, I can do that. Nobody can stop me so long as it’s a single family, single detached home that meets the regulatory requirements. If instead, I wanted to build a duplex to allow two families to be in the same property, no matter how I design the house, it has to go through all of these approval processes and all of my neighbors in the neighborhood get a say about whether or not that happens. So those are the kinds of things where sometimes we require people to jump through all these Hoops and sometimes we don’t. Those are the rules that need to change, so you’re not allowing populations to be able to veto certain projects.

Jordan That brings me to a question that maybe you just answered, but I want to ask it anyway, which is, is there anything obvious that governments could do right now that we haven’t done for whatever reason? Because there’s not the political will for it maybe?

Mike So part of it is political will. One thing I would have loved to see from all the federal parties that unfortunately didn’t make any of their platforms was building student residences at colleges and universities. I think why they didn’t go there is traditionally that’s more of a provincial lead process, though the federal government has given funding to those before and why I say that is a lot of our population increases, particularly in Ontario and British Columbia, are coming from students, often international students. And they’re great for the community. Having such talented 20 somethings from all over the world is making our communities better. But we’re not building the places for them to live. So what’s happening is a lot of single family homes are getting turned into student rentals and not being occupied by families. So what we could be doing but we’re not, is working with provinces and colleges and universities, maybe with a third, a third, a third type funding models to get more student residences built, which would take some of the pressure off of our single family homes. And actually be able to get more families into homes.

Jordan Lastly, not asking you to pick a winner or pick someone for whom our listeners should vote. But as you look at these platforms, given what we see now, what’s your take on, no matter who wins, where we’re likely to be in a couple of years? Like, is there anything here that really would curb this or is this a natural progression that’s going to be really hard to stop?

Mike I think it is going to be a natural progression. One of the ways to look really foolish is to make a three or five year real estate predictions because a lot can happen over the next few years. Interest rates could spike up. International students might decide that they don’t want to come to Canada anymore. For whatever reason, the market could go all kinds of places. But I’m not seeing anything in these platforms that’s really transformative. I think it would help. I think they’ll help take the pressure off. I think they will get more people into homes, but I think overall, they’re not the types of deep, transformative change we’re going to need to solve this issue.

Jordan Thank you for the analysis. Mike it’s always great to talk to you.

Mike Thank you for having me.

Jordan Mike Moffat of Smart Prosperity and the Ivey Business School. That was The Big Story, for more from us, including all of our episodes related to this election, featuring lots of policy, lots of detail, lots of things to help you make a choice. Head to thebigstorypodcast.ca we have a whole separate page with just Election stuff. You can also talk to us at @TheBigStoryFPN you can write to us at[click here!] and you can find us in any podcast player you pick. You choose, we’ll be there. Thanks for listening. I’m Jordan Heath Rawlings, we’ll talk tomorrow.