In BC, there was a joint provincial-federal expert panel that took a close look at housing supply in BC. Why is this problem so tough? We have people who want to live in Metro Vancouver and other cities, where there's lots of jobs. We have other people who want to build housing for them. Metro Vancouver has limited land, but it's not rocket science or brain surgery - elevators exist.
To paraphrase their final report, the problem is that municipalities in BC regulate new housing like it's a nuclear power plant, and tax it like it's a gold mine. I understand that this is also the case in Ontario, but not in provinces like Quebec and Alberta.
Municipalities use extremely restrictive zoning to ensure that land sells at a discount, and then when you want to build an apartment building, you have to beg them for permission. In exchange, they take 70-80% of the discount. They're taking away your ability to build housing on your land, and then selling it back to you.
The result is that municipalities keep pushing up the price floor on new housing. It's like a ratchet: the price of new housing can only go up, it can never go down. By taxing new housing in this way, they're keeping property taxes low for existing homeowners - but they're jacking up housing costs for renters and first-time homebuyers, resulting in low real wages (after paying for rent or a mortgage there's not much left over) and labour shortages (even an anesthesiologist can't live close to a hospital in Vancouver).
And then when Covid hit, suddenly there were a lot more people working from home, needing more space, and willing to move. It's like the housing shortage, previously confined to the GTA and Metro Vancouver, spilled over everywhere. In BC, it's like Nanaimo and Nelson are now suburbs of Vancouver, with prices and rents to match.
The BC government's been pushing municipalities hard to allow more housing (multiplexes everywhere and high-rises near major transit stops). They've been looking closely at Auckland's 2016 upzoning, at state-level legislation in Western states in the US, and also at non-market models in places like Singapore and Vienna.
Edmonton is probably even further ahead than BC. (They reformed their zoning bylaws to allow more infill housing, effective January 1, 2024; BC's provincial legislation set a deadline for municipalities of June 30, 2024.) https://morehousing.ca/edmonton-video
There are a lot of very interesting ideas in this comment. I think it underlines my suspicion that the problem is a product of unfortunate choices made at all levels of government and skewed incentives that have been integrated into the system over many decades.
Properly fixing this would probably require unraveling the whole knot. But in the real world, we'll probably be best served by strategically chipping away at the edges.
CLTs in combination with cooperative housing is the way to go. The St Lawrence Neighbourhood in the city of Toronto is an excellent example of such. Developed as Crombie Park in the early 1970s (named after one of our most progressive mayors, David Crombie) on previously (and mostly city owned) industrial land near the waterfront, it was a near perfect mix of medium rise cooperative housing, condos & regular market-rate apartment buildings. Of course, in the years since, the proliferation of condos has upset the balance, nearly destroying the neighbourhood, but the Co-ops persevere in providing decent, affordable housing 50 years hence. That is, in part, due to the fact that the co-ops were able to secure 99-year mortgages at the time. And tbh, some have benefited better than others over the years due to sound fiscal management.
I agree with Mr. Clinton that this is a crisis. I do not agree that this is a problem. Housing was never an issue in Canada until government came charging in with their damn rulebooks. The solution is to kick the buggers out again. Simple!
Acting on the wisdom of Mark Twain, "When you find yourself in a hole, stop digging!" I offer the following suggestions:
1. Federal - stop any Federal activity that imposes costs on the production of building materials
2. Provincial - take away their power to restrict access to land. It's our land - not theirs!
3. Municipal - give municipalities 30 days to issue a building permit. If they fail, then the permit is issued automatically in accordance with the application.
Canadians, it's time for us to take our country back.
There certainly is a risk of nasty market distortions. And it's a rare government that gets it right the first time. But I'm not sure that tax incentives *always* punish property owners.
"You don’t want farmers plowing their crops under in favor of residential development." Why not? When something like 7% of Canada's milk production is destroyed to keep the price jacked up, the advocates of our fatally mixed economy should have to admit that there is obviously too much land in agriculture. The dead hand of leviathan is so pervasive that all "solutions" make it more so. How about state owned soviet style concrete skyscrapers named some Orwellian equivalent of "the projects". Canadians are excluded from 89% of our land base under Crown ownership and the resource industries that rely on that land are under political assault. Privatizing a quarter of that land would eventually see a sociology much like Europe and the US where people, like farmers, can be tied to the land rather than all reside in cites and towns thus relieving pressure on urban housing demand. There are 10 million privately owned forests in Europe and 16 million in the US where BC's forest industry is actively relocating. Perhaps even the levels of immigration we enjoy will not all move to a handful of large cities.
> "You don’t want farmers plowing their crops under in favor of residential development." Why not? When something like 7% of Canada's milk production is destroyed to keep the price jacked up, the advocates of our fatally mixed economy should have to admit that there is obviously too much land in agriculture.
Point well taken. But we would nevertheless still have to be exceptionally careful not to introduce anthropogenic bugs into the system. I'd imagine even libertarians would want at least some zoning restrictions on some level.
The easy way out would be to agree with some least "level of zoning" but we know where that leads. No, I prefer to harken back to my undergrad resource economics course of over half a century ago and rely on economic rents to determine highest use. On a per hectare basis, mining is number one followed by industrial, commercial / residential, agriculture, forestry and wilderness. This combined with private property rights (the source of all natural rights) introduces the notion of those who refuse to sell allowing sober second thoughts. Nothing tells me that we will return to reason on this so I think we will sadly continue down Hayek's "road to serfdom".
There is lots of blame for the housing crisis to go around, going as far back as the early '90s when the federal government stopped financing affordable housing because it was facing a fiscal crisis, instead of coming up with more innovative solutions (as they did for the sustainability of the CPP). I particularly like your ideas of a land value tax and community land trusts. (The Ottawa CLT is doing the latter, with initial success, but scaling it up to make a dent in the problem is an issue.)
But here we are, with this huge gap between incomes and housing prices. It is unlikely that housing prices will come down significantly -- too many losers (read: voters) and deflation could easily evolve into a crisis of its own. Therefore, in addition to all the talk about increasing supply, the other way to restore affordability is for incomes to increase. Actually, not everybody's income across the board but the income of those for whom the gap is the greatest more than of that of others.
Blair Fix conducted an interesting thought experiment in this regard (https://economicsfromthetopdown.com/2024/10/23/the-american-housing-crisis-a-theft-not-a-shortage/): Using US data, he shows that if income inequality had remained through 2022 as it was in 1970, then the housing crisis would have evaporated. In short, the housing crisis is not due to a housing shortage, it is caused by poverty. That's too simplistic, but it holds a fundamental truth which is insufficiently recognized.
Interesting. Although I'm not necessarily convinced that income inequality has changed all that much since the 70s. I just checked out the Gini coefficients of adjusted total income for Canada between 1976 and 2022 (https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=1110013401) and the overall change was just 5.15%. That's not negligible, but I don't think it represents enough disruption to make such a difference.
I will say that this is interesting enough that it might become its own post at some point (although I have a very long queue to get through first)>
And we'd still have to find some way to increase supply.
Income inequality has indeed increased a lot less in Canada than in the US -- Fix' data show an increase in the Gini coefficient from about .44 in 1970 to about .62 in 2022. Do keep in mind, though, that the Canadian data for 2020-22 are heavily influenced by the generous COVID compensations. The Gini coefficient for Total Income (which you looked at for your response) peaked at .357 in 2013, an 8.2% increase.
The other thing to keep in mind is that after-tax income inequality (which is after all what households face) ended up in 2022 exactly where it was in 1976: at .300. Here too, however, it reached a peak of .346 in 2007, a 15% increase.
The basic point is that lower-income households will have to earn higher income if the affordability gap is to be reduced. The reduction in low-wage immigration will help.
While micro homes or apartments won't accomodate families there's a lot of single folks that just need some sort of safe housing somewhere. With every city having a tent city it's safe to say there is a need for something bigger and more permanent than a tent that might not hold more than one or twom adults.
When we discuss the Housing Crisis we need to define what type of housing are we addressing. Private ownership, rental none owned, co-op, rent to income etc.
It goes without saying when people use the term "Affordable Housing." What type of housing are we taking about? This brings us back to my first question, but is also leads to a follow up question. What does affordable housing actually look like?
The third question we need to ask is what are the conditions that has brought us to our current situation?
We also need to address what type of infrastructure upgrades and enhancements will need to be done.
Also, what supporting commercial/business serving construction will be need to be built concurrently to support large residential building projects? People need to eat and get their clothing some where.
These are important questions to vet through, but at the end of the day 2 things need to happen.
1.) Drastically reduce all forms of new person entries into to Canada. This will help reduce the demand on all forms of housing especially with an over reliance on International students and temporary workers.
2.) Create favourable economic conditions to attract both foreign investment and spur domestic growth.
Some things that could be done are as follows:
1.) Scrap the carbon tax
2.) Drastically reduce the public service
3.) Reduce public spending and reduce OAS increase to 3-4% vs. 10%.
4.) scrap the pharma care and Dental care plans
5) Expand the development of LNG
6.) Expand the development of nuclear
power
7.) Remove forced fertilizer reductions for agriculture
8.). Protect agriculture land for ceding to development
9.) reverse recent income tax adjustment
10.) remove change of use tax on private owner properties
11.) Reverse penalization for house flippers
Etc.
12.) reduce land transfer tax
13.) Ensure municipal properties access to natural gas to heat their homes (some are trying to curtail this)
In BC, there was a joint provincial-federal expert panel that took a close look at housing supply in BC. Why is this problem so tough? We have people who want to live in Metro Vancouver and other cities, where there's lots of jobs. We have other people who want to build housing for them. Metro Vancouver has limited land, but it's not rocket science or brain surgery - elevators exist.
To paraphrase their final report, the problem is that municipalities in BC regulate new housing like it's a nuclear power plant, and tax it like it's a gold mine. I understand that this is also the case in Ontario, but not in provinces like Quebec and Alberta.
Municipalities use extremely restrictive zoning to ensure that land sells at a discount, and then when you want to build an apartment building, you have to beg them for permission. In exchange, they take 70-80% of the discount. They're taking away your ability to build housing on your land, and then selling it back to you.
The result is that municipalities keep pushing up the price floor on new housing. It's like a ratchet: the price of new housing can only go up, it can never go down. By taxing new housing in this way, they're keeping property taxes low for existing homeowners - but they're jacking up housing costs for renters and first-time homebuyers, resulting in low real wages (after paying for rent or a mortgage there's not much left over) and labour shortages (even an anesthesiologist can't live close to a hospital in Vancouver).
And then when Covid hit, suddenly there were a lot more people working from home, needing more space, and willing to move. It's like the housing shortage, previously confined to the GTA and Metro Vancouver, spilled over everywhere. In BC, it's like Nanaimo and Nelson are now suburbs of Vancouver, with prices and rents to match.
https://morehousing.ca/debate-notes
The BC government's been pushing municipalities hard to allow more housing (multiplexes everywhere and high-rises near major transit stops). They've been looking closely at Auckland's 2016 upzoning, at state-level legislation in Western states in the US, and also at non-market models in places like Singapore and Vienna.
https://morehousing.ca/bc-election
Edmonton is probably even further ahead than BC. (They reformed their zoning bylaws to allow more infill housing, effective January 1, 2024; BC's provincial legislation set a deadline for municipalities of June 30, 2024.) https://morehousing.ca/edmonton-video
There are a lot of very interesting ideas in this comment. I think it underlines my suspicion that the problem is a product of unfortunate choices made at all levels of government and skewed incentives that have been integrated into the system over many decades.
Properly fixing this would probably require unraveling the whole knot. But in the real world, we'll probably be best served by strategically chipping away at the edges.
In Ontario, I thought the recommendations of the Housing Affordability Task Force made sense. https://morehousing.ca/ontario-task-force
For a big-picture view, see the Blueprint for More and Better Housing. https://morehousing.ca/blueprint
CLTs in combination with cooperative housing is the way to go. The St Lawrence Neighbourhood in the city of Toronto is an excellent example of such. Developed as Crombie Park in the early 1970s (named after one of our most progressive mayors, David Crombie) on previously (and mostly city owned) industrial land near the waterfront, it was a near perfect mix of medium rise cooperative housing, condos & regular market-rate apartment buildings. Of course, in the years since, the proliferation of condos has upset the balance, nearly destroying the neighbourhood, but the Co-ops persevere in providing decent, affordable housing 50 years hence. That is, in part, due to the fact that the co-ops were able to secure 99-year mortgages at the time. And tbh, some have benefited better than others over the years due to sound fiscal management.
I agree with Mr. Clinton that this is a crisis. I do not agree that this is a problem. Housing was never an issue in Canada until government came charging in with their damn rulebooks. The solution is to kick the buggers out again. Simple!
Acting on the wisdom of Mark Twain, "When you find yourself in a hole, stop digging!" I offer the following suggestions:
1. Federal - stop any Federal activity that imposes costs on the production of building materials
2. Provincial - take away their power to restrict access to land. It's our land - not theirs!
3. Municipal - give municipalities 30 days to issue a building permit. If they fail, then the permit is issued automatically in accordance with the application.
Canadians, it's time for us to take our country back.
They need to stop immediately with the wild immigration numbers. Trudeau needs to lose the next election for screwing up the country.
Taxing vacant houses is already being done in BC. It’s not helping.
Young people in Victoria can’t even afford rent. Buying is impossible.
Every time you mess around with tax incentives and punishing property owners you punish those owners to benefit someone else.
There certainly is a risk of nasty market distortions. And it's a rare government that gets it right the first time. But I'm not sure that tax incentives *always* punish property owners.
"You don’t want farmers plowing their crops under in favor of residential development." Why not? When something like 7% of Canada's milk production is destroyed to keep the price jacked up, the advocates of our fatally mixed economy should have to admit that there is obviously too much land in agriculture. The dead hand of leviathan is so pervasive that all "solutions" make it more so. How about state owned soviet style concrete skyscrapers named some Orwellian equivalent of "the projects". Canadians are excluded from 89% of our land base under Crown ownership and the resource industries that rely on that land are under political assault. Privatizing a quarter of that land would eventually see a sociology much like Europe and the US where people, like farmers, can be tied to the land rather than all reside in cites and towns thus relieving pressure on urban housing demand. There are 10 million privately owned forests in Europe and 16 million in the US where BC's forest industry is actively relocating. Perhaps even the levels of immigration we enjoy will not all move to a handful of large cities.
> "You don’t want farmers plowing their crops under in favor of residential development." Why not? When something like 7% of Canada's milk production is destroyed to keep the price jacked up, the advocates of our fatally mixed economy should have to admit that there is obviously too much land in agriculture.
Point well taken. But we would nevertheless still have to be exceptionally careful not to introduce anthropogenic bugs into the system. I'd imagine even libertarians would want at least some zoning restrictions on some level.
The easy way out would be to agree with some least "level of zoning" but we know where that leads. No, I prefer to harken back to my undergrad resource economics course of over half a century ago and rely on economic rents to determine highest use. On a per hectare basis, mining is number one followed by industrial, commercial / residential, agriculture, forestry and wilderness. This combined with private property rights (the source of all natural rights) introduces the notion of those who refuse to sell allowing sober second thoughts. Nothing tells me that we will return to reason on this so I think we will sadly continue down Hayek's "road to serfdom".
There is lots of blame for the housing crisis to go around, going as far back as the early '90s when the federal government stopped financing affordable housing because it was facing a fiscal crisis, instead of coming up with more innovative solutions (as they did for the sustainability of the CPP). I particularly like your ideas of a land value tax and community land trusts. (The Ottawa CLT is doing the latter, with initial success, but scaling it up to make a dent in the problem is an issue.)
But here we are, with this huge gap between incomes and housing prices. It is unlikely that housing prices will come down significantly -- too many losers (read: voters) and deflation could easily evolve into a crisis of its own. Therefore, in addition to all the talk about increasing supply, the other way to restore affordability is for incomes to increase. Actually, not everybody's income across the board but the income of those for whom the gap is the greatest more than of that of others.
Blair Fix conducted an interesting thought experiment in this regard (https://economicsfromthetopdown.com/2024/10/23/the-american-housing-crisis-a-theft-not-a-shortage/): Using US data, he shows that if income inequality had remained through 2022 as it was in 1970, then the housing crisis would have evaporated. In short, the housing crisis is not due to a housing shortage, it is caused by poverty. That's too simplistic, but it holds a fundamental truth which is insufficiently recognized.
Interesting. Although I'm not necessarily convinced that income inequality has changed all that much since the 70s. I just checked out the Gini coefficients of adjusted total income for Canada between 1976 and 2022 (https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=1110013401) and the overall change was just 5.15%. That's not negligible, but I don't think it represents enough disruption to make such a difference.
I will say that this is interesting enough that it might become its own post at some point (although I have a very long queue to get through first)>
And we'd still have to find some way to increase supply.
Income inequality has indeed increased a lot less in Canada than in the US -- Fix' data show an increase in the Gini coefficient from about .44 in 1970 to about .62 in 2022. Do keep in mind, though, that the Canadian data for 2020-22 are heavily influenced by the generous COVID compensations. The Gini coefficient for Total Income (which you looked at for your response) peaked at .357 in 2013, an 8.2% increase.
The other thing to keep in mind is that after-tax income inequality (which is after all what households face) ended up in 2022 exactly where it was in 1976: at .300. Here too, however, it reached a peak of .346 in 2007, a 15% increase.
The basic point is that lower-income households will have to earn higher income if the affordability gap is to be reduced. The reduction in low-wage immigration will help.
While micro homes or apartments won't accomodate families there's a lot of single folks that just need some sort of safe housing somewhere. With every city having a tent city it's safe to say there is a need for something bigger and more permanent than a tent that might not hold more than one or twom adults.
When we discuss the Housing Crisis we need to define what type of housing are we addressing. Private ownership, rental none owned, co-op, rent to income etc.
It goes without saying when people use the term "Affordable Housing." What type of housing are we taking about? This brings us back to my first question, but is also leads to a follow up question. What does affordable housing actually look like?
The third question we need to ask is what are the conditions that has brought us to our current situation?
We also need to address what type of infrastructure upgrades and enhancements will need to be done.
Also, what supporting commercial/business serving construction will be need to be built concurrently to support large residential building projects? People need to eat and get their clothing some where.
These are important questions to vet through, but at the end of the day 2 things need to happen.
1.) Drastically reduce all forms of new person entries into to Canada. This will help reduce the demand on all forms of housing especially with an over reliance on International students and temporary workers.
2.) Create favourable economic conditions to attract both foreign investment and spur domestic growth.
Some things that could be done are as follows:
1.) Scrap the carbon tax
2.) Drastically reduce the public service
3.) Reduce public spending and reduce OAS increase to 3-4% vs. 10%.
4.) scrap the pharma care and Dental care plans
5) Expand the development of LNG
6.) Expand the development of nuclear
power
7.) Remove forced fertilizer reductions for agriculture
8.). Protect agriculture land for ceding to development
9.) reverse recent income tax adjustment
10.) remove change of use tax on private owner properties
11.) Reverse penalization for house flippers
Etc.
12.) reduce land transfer tax
13.) Ensure municipal properties access to natural gas to heat their homes (some are trying to curtail this)
Etc.