Provide Affordable Housing for Canadians

The problem

The hallmark of a civilized society is that it provides adequate shelter to all who need it. Shelter is part of Maslow’s ‘hierarchy of needs.’ In theory, everyone in Canada is equally entitled to access housing that meets basic conditions. These conditions require housing to be secure, affordable, habitable, accessible and culturally appropriate, while being in a location that is safe and allows engagement with local economies and services. The reality today in Canada, is strikingly at odds with this policy intent. The problems in Canada’s housing sector are many. For starters, Canada’s most vulnerable populations are ill-housed: Indigenous peoples; persons with a physical, cognitive or mental disability; low and moderate income folks; the young; single parent families; women fleeing violence, seniors on modest fixed incomes etc. There are currently 1.5 million households living in ‘core housing need’ [2021 Census data]. Between 1994 and 2017, fewer than 4,000 nonmarket homes were built every year in contrast to the 1970s and early 1980s, when 35,00 to 40,000 nonmarket homes were built per year. In terms of purpose built rental stock, including larger apartments, traditionally the leading source of affordable housing, it too has been radically cut back. In the two decades between 1960 and 1980, about 50,000 apartments were built each year. In the four decades between 1980 and 2022, half that number were built. Effectively, starting with the Liberal Government of Jean Chretien in 1993, the construction of Federally-assisted affordable housing units (public housing, non-profit and cooperative housing, and affordable housing) was gutted. The predictable result of curtailment in federal expenditures on nonmarket housing is the growing scourge of homelessness, the precise parameters of which are unknown because the lead federal agencies nominally in charge of tackling it, the Canada Mortgage and Housing Corporation and Infrastructure Canada, have been unable to adequately report on their progress to achieving a federally established target.

The reality today is that over 95% of housing in Canada is market housing, built and managed by the private sector. In Singapore, by contrast, less than 20% of housing is market-based. Currently in Canada, 66% of Canadians own their own homes. In many cases their good fortune is owed to a mix of timing, parental assistance with down payments, inheritances, or fortuitous location in sought-after urban locales. Whatever the origin, Remax has estimated that this discrepancy among families is manufacturing an immense wealth gap between owners and renters. They suggest that homeowners have an average net worth 29 times that of renters. Add to this, the increased polarization of wealth which saw the net worth of families in the top half of the wealth distribution increase substantially after 1999, while the position of the bottom half stagnated markedly, and it becomes easier to see why low and moderate income families are less able these days to help their offspring get on the real estate ladder. As Canadian housing policy researcher, Carolyn Whitzman has noted, ‘younger moderate and medium-income households are locked out from home ownership.’

The final problem with our housing policy is the very fact that successive Liberal and Conservative governments have doubled down on real estate, and all of its associated speculative frenzy, as the leading industrial sector (as a percent of GDP) in our economy. Of our $1.7 trillion annual GDP, roughly 14% is devoted to market real estate. This portion is double the OECD average. In contrast, in Canada we devote only 0.7% of our GDP to nonmarket housing. A lot of this has to do with the tax treatment of housing ownership (tenure); the generous tax benefits accorded to Real Estate Investment Trusts, the revenues that the banks earn from the extension of cheap credit and financial incentives (some backstopped by government) and other factors. This is a problem because it means the effective tax rate on housing is lower than on other investments and this skews investment incentives accordingly. It distorts capital investment dollars towards real estate and away from other productive purposes or new economic activities. Liberal and Conservative governments turned a blind eye as speculative property investing and house flipping became the ‘only game in town.’ In this new era, sanctioned by the old line parties, the ownership of real estate assets has become the litmus test for upward mobility.  We live in a new Gilded Age and, to paraphrase the American comedian George Carlin, if you are young or on a modest salary, “you ain’t in the Club.”