Ottawa’s plan for improving the fortunes of Canada’s middle-class is going to fail to yield results until it does more to address sky-high housing prices.
Brian Lee Crowley and Sean Speer, writing in the Sun chain of newspapers, urge Ottawa to move the discussion of unaffordable housing away from house prices to the real cause: Government policies that limit the supply of housing and push up prices in major cities.
By Brian Lee Crowley and Sean Speer, Nov. 14, 2016
Ottawa’s recent Fall Economic Statement presented a bunch of middle-class Canadians who are purportedly better off as a result of the government’s deficit-financed agenda.
We met the childless couple of Brandon and Briana in Scarborough, GTA commuters Josh and Josée, and expecting parents Adam and Farah. Each of these families in their own unique way are benefitting from some combination of lower taxes, higher benefits, and increased spending on public transit.
It presented a compelling picture of the government’s efforts to support middle-class Canadians. But marginal improvements in taxation, child benefits or urban transit won’t get them into the middle class or keep them there.
The evidence, however, tells us that what's going to get them there is affordable, responsible homeownership. This is something the economic statement doesn't break down. And Ottawa's story fails to acknowledge that policy at other levels of government is making that harder.
Think of Brandon and Briana. The government boasts that its middle-class tax cut will save them $900 per year, which the couple will put to paying down their condominium mortgage. It certainly helps. But average condo prices in the Toronto market have climbed by roughly 15% to more than $461,000 in recent years. And so Brandon and Briana could be dedicating nearly 40% of their household income to cover their mortgage and housing costs.
Or consider Josh and Josée. They spend 90 minutes commuting to and from work every day because they can’t find affordable housing in Toronto. New investments in public transit may help on the margins.
But the real problem is detached home prices in the city have gone up by 20% in the last year alone and now exceed $1.2 million, and essentially priced them out of the Toronto market. Josh and Josée will therefore need to keep spending hours each week on the bus or train.
And finally Adam and Farah. They’re expecting their second child and are presumably concerned about if they have enough space. More generous child-care payments will be helpful but ultimately won’t help them find better housing.
And, with detached home construction at historic lows in cities such as Toronto and Vancouver, homes for growing families are basically unaffordable especially if Farah decides to temporarily leave the workforce.
The point is: housing affordability in general and homeownership in particular are key to the everyday lives of middle-class Canadians and the growing housing crisis in major Canadian cities is undermining the Trudeau government’s middle-class agenda.
And the fact is that it’s provincial and local government policy – not foreign investors – that’s mostly responsible for these housing affordability challenges.
Restrictive land-use regulations, burdensome building and construction codes, and “snob” zoning have led to housing supply being outstripped by demand. Detached home construction in Toronto for instance is at a 36-year low.
Housing affordability in general and homeownership in particular are key to the everyday lives of middle-class Canadians
This gulf between supply and demand is driving up prices and leaving couples like Brandon and Briana, Josh and Josee, and Adam and Farah with less money and fewer opportunities.
The Trudeau government is rightly focused on helping Canadians join the middle class and has taken some positive steps in this regard. But, until provinces and cities start to unwind the exclusionary policies that are making housing unaffordable in our major cities, middle-class aspirations will simply remain aspirations.
- Brian Lee Crowley is the managing director and Sean Speer is a Munk senior fellow at the Macdonald-Laurier Institute.