It’s a puzzle. Whatever its answer, its consequences are likely to foment an upheaval in Canada that the coming defeat of Justin Trudeau’s Liberals and the election of a Conservative government should not be expected to forestall.
The puzzle, by the reckoning of urban planner, landscape architect, author and University of British Columbia professor Patrick Condon, can be put this way.
Many, if not most, Canadians under the age of 35 are unlikely to ever own a place of their own. Canadians earn a bit better than $57,000 annually, on average. But you need more than three times that income to afford the mortgage on a typical Toronto condo.
Average house prices in Canada have gone from $435,000 to $794,000 since Trudeau’s Liberals were elected in 2015, and average rents have risen from $966 to $2,187.
Here’s the puzzle, according to Condon: “For leaders across the entire political spectrum to have landed on a response to this critical problem that is essentially the same, and is entirely wrong, is unprecedented. It’s a very unique circumstance, when you think about it.”
The responses to the “housing crisis” from the Liberals, the Conservatives and the New Democrats differ in their polemics and their particulars, but they all land on the same square: Do nothing to undermine the market value of residential real estate, pour everything into boosting supply, and hey presto, housing becomes more affordable.
None of it will work, says Condon, author of Broken City: Land Speculation, Inequality and Urban Crisis.
The Liberals prefer a panoply of costly measures to stimulate demand and to ease the burden of mortgages, while their primary focus is on fiscal engineering to jump-start housing supply. Conservative Leader Pierre Poilievre’s remedies are all about boxing the ears of “gatekeepers” and cutting red tape and ridding homebuilders of bothersome regulations.
In British Columbia, the NDP government is sparing the carrots and going with sticks. Premier David Eby’s government has effectively expropriated local zoning powers, strong-arming local governments to submit to housing-start targets and development permit approvals.
But none of it will work, Condon says, because it never has, and things are only going to get worse. The Royal Bank of Canada agrees with that much. A median-income household now has to shell out a “staggering” 63.5 per cent of its earnings just to cover the costs associated with an average Canadian home. The RBC’s analysts figure it will likely be years before Canadians see any appreciable improvement in this state of affairs.
“Political instability is already showing up in worrying circumstances,” Condon told me. “It’s debilitating and destabilizing. There’s a class issue here, and the way this is playing out is we’re creating a class separation between those who have real estate assets and their families, and those who don’t and who never will, because if you project their lifetime income against what it would cost to own a house, they’re s–t out of luck.”
If it was all about supply and demand, Vancouver would not be in the straits it’s in today. And as goes Vancouver, so goes Canada. That’s been the pattern.
“We’ve had 50 years of adding supply in Vancouver, tripling the number of housing units since the 1960s,” Condon says, but the gap between the median price of housing in Vancouver and median household incomes has increased sixfold. “If adding new housing units led to more affordability, as David Eby and Pierre Poilievre and (Justin) Trudeau claim, we should have the cheapest housing in North America.
“But we don’t. The empirical evidence is clear. It’s not a problem of supply and demand. Vancouver has the most expensive housing in North America.” As a measure of the relationship between income and house prices, “We’ve got the third highest prices globally, behind only Hong Kong and Sydney (Australia).” And Toronto isn’t far behind.
The mobility of global capital has a lot to do with it. The natural tendency of land to soak up the wealth produced by capital and labour has a lot to do with it, too. So does the scourge of development-permit fees and related costs, but Poilievre’s proposal to go after those costs won’t put a dent in home prices.
The Canada Mortgage and Housing Corporation reckons that “at the upper end,” permits and fees can add 20 per cent to housing costs. But the market value of residential property is mostly about the land underneath the home. All that happens when you slash fees is the residual value of the property rises proportionately. In Metro Vancouver, even at its eastern edges, residential lots are now going for as much as $1.2 million.
If you force “upzoning” on a neighbourhood and build fourplexes where single-family houses used to be, you won’t necessarily make housing more affordable because the extra units often end up at the same per-square-foot price as the houses that got torn down to make way for them. “It just adds advantage to whoever’s lucky enough to own the land that’s going to be used for the construction project,” says Condon.
It may not serve Poilievre’s campaign strategy to admit out loud that there’s not much he can do, that the damage may even be irreparable, but it’s hard to see how he can live up to his pledges to match population growth with Canada’s capacities in housing and health care. At least not without radical surgery.
“If you want an idea of how I would run the immigration system overall, it’s the way it was run for the 30 years prior to Trudeau being prime minister,” Poilievre says.
“We had a common sense consensus between Liberals and Conservatives for three decades that screened people to make sure they were safe, only brought in the numbers that we could absorb into our housing, health-care and job market, and blocked temporary foreign workers where they were taking jobs from Canadians.”
Fair enough, but here’s another puzzle. How would Poilievre engineer a return to “normal” now, after everything that’s happened?
According to Statistics Canada, Canada’s population is now 41.2 million, up from 35.7 million when the Trudeau government swept to power in 2015. But nobody really knows. Immigration, Refugees and Citizenship Canada says 354,000 people were sworn in as Canadian citizens last year, and another 471,771 people were admitted as permanent residents.
But 2023 ended with an estimated 2.7 million temporary residents living in Canada, including foreign students, but not including people living in Canada illegally. Those “undocumented” arrivals number between 300,000 and 600,000 people, according to Immigration Minister Marc Miller.
“We’re in a new era,” says Condon. “Short of an economic upheaval on the scale of the Great Depression, or World War II, we’re not going to be able to dig our way out of this. … The best we can hope to do to mitigate the disaster and not make it worse. What we’re doing now is making it worse. But we can at least do one small thing, to mitigate the damage.
“If you’re going to upzone, don’t give it away for free. Tax a percentage of the new value of that land and use it for social benefit purposes,” Condon told me.
And those purposes have to mean the construction of non-market housing.
National Post