There are some promising slivers outlined in the federal Liberal party’s campaign platform when it comes to tackling housing affordability, but there is still much to address, according to several economists.
One crucial step to curb runaway housing costs is fundamentally overhauling what Canadians think a home is, said Ricardo Tranjan, political economist and senior researcher with the Canadian Centre for Policy Alternatives.
“We need to go back to the notion that a house is a place to live and raise a family, and can get you some value over 20 to 30 years,” said Tranjan in an interview. “But if we keep thinking about housing as where we keep all your money, we’ll never address the issue.
“On one hand, we have folks who have entered the market, and they feel good as their wealth has increased but they fear any sort of regulation that would control housing prices. On the other hand, we have those who haven’t been able to enter the market. It gets you into this debate of whether or not a house is a place to live in, or a financial asset.”
The way Canadians view homeownership is flawed, adding there’s a reluctance from political leaders to do anything drastic about it, according to Paul Kershaw, a University of British Columbia associate professor who studies housing policy and founder of advocacy group Generation Squeeze.
“It’s a cultural and political addiction that’s making housing affordability really challenging,” said Kershaw in an interview. “It’s partly because Canadian home owners like it when their home values go up. Real estate contributes to our GDP more than any other industry, so political leaders like to take credit for what appears to be a strong economy.”
GRADING THE LIBERALS PLATFORM
On the campaign trail leading up to Canada’s federal election, party leaders were grilled repeatedly on the subject of housing affordability. A longstanding issue in Canada’s biggest cities, it's become a nationwide problem during the pandemic with many major markets seeing massive price increases in a short period.
While many housing markets have seen sales cool off recently, the national average home price came in at $669,200 in September, according to the Canadian Real Estate Association. In March 2020, before the COVID-19 impacted the real estate market, that figure was as low as $540,000.
“There are a number of important ideas that were promising in the Liberal Party platform,” said Kershaw. “Dial down ‘renovictions’, which is really hurting renters. There’s also an interesting rent to own scheme that the liberal are proposing. I think that’s actually more good boutique retail politics, rather than a game changer, but I’m curious to see what they mean.”
“More substantial things are probably going to be in their idea for a two-year moratorium on foreign purchases of residential real estate. That’s going incrementally beyond the foreign buyers tax we have in Ontario and B.C.”
Tranjan dismissed housing initiatives outlined in the Liberal Party platform, such as a ban on foreign purchases and measures to curb bidding wars, calling them “low-hanging fruit" which won’t fix the system.
Instead, he stressed the importance of a review and the eventual regulation of real estate investment trusts (REITs), which he said are a contributing factor to rising rental prices in many markets.
Tranjan believes more pressure should be put on large corporations to offer generous pension plans.
“In the last few decades, the percentage of the population that has good pension plans is decreasing," he said. "That’s pushed people to think of their homes as their key retirement investments. Because of that people are willing to pay more."
WHAT ABOUT WAGES?
The share of income that gets dedicated to housing costs continues to rise, so it may be natural to wonder why not just increase wages.
Kershaw said that’s just not doable.
“What businesses are going to be able to tolerate a 30 per cent year over year increase to allow for earnings to catch up? It’s a fiction to imagine we can drive earnings up to that extent," Kershaw said. "It’s not going to be some magic bullet over the next few years where we’re going to have a dramatic increase to earnings.”
Housing contributes more to economic growth than any other industry, said Kershaw; and yet, only two per cent of Canadians find employment in that sector.
What the Liberals needs to key in on is the idea of going beyond GDP, recognizing that prosperity is more than just that blunt indicator, Kershaw said.
“As the gap between home values and earnings grows, and peoples’ dreams of home ownership are crushed, what’s their consolation prize? They become a renter. And rent is rising, too. As property values increase, it increases pressure on landlords and thereby rent,” he said.
“This is not a GTA (Greater Toronto Area) and Vancouver problem anymore. It’s pervasive in cities all over the country."