Brian Hagood is a principal of CAB Architects in Toronto.
Since the housing market’s peak last February, home prices in Canada have fallen 23 per cent. But for the average Canadian household, rising interest rates have made housing affordability continue to worsen, nevertheless. The problem, of course, is gravely serious – it wastes our capital, discourages the young from starting families, and seeds resentment among those excluded from home ownership. As with other existential threats, such as climate change, Canadians must make the necessary sacrifices to meet the challenge.
The federal government’s new restrictions on foreign home ownership in Canada are a step in the right direction, but more policies like these, which aim to reduce demand, are needed to help solve the crisis. Our politicians, however, often seem paralyzed by conflicting interests: namely those of current homeowners and the investors who benefit from the status quo versus the growing contingent of the young and less affluent who suffer.
Except for politically low-risk policies such as the new foreign buyer restrictions, this has steered much of the discussion toward increasing the housing supply. Believing supply is to blame for the problem is appealing because the solution would appear to be a simple and economically beneficial one: Just build more housing. In truth, while supply plays a part, there is hardly much evidence that it is the main reason for our present crisis.
Take for example a remarkable fact reported by Rachelle Younglai in this newspaper: Between 2016 and 2021 the Greater Toronto Area’s supply of private dwellings outpaced population growth by more than 50 per cent. And yet the cost of housing continued its incredible climb, with the average house selling for 64 per cent more in the same period, compared with only 12-per-cent inflation.
How could a lack of supply plausibly explain this huge discrepancy? The answer lies with how the absence of restrictions converts housing from a basic need into an inflated investment vehicle – for citizens and foreigners alike.
In fact, the evidence for rampant speculation is all around us. Consider that as of 2019, owners of multiple properties now constitute the largest segment of home buyers in Ontario. As a consequence, many homes sit vacant or are underutilized.
For example, the population of Toronto’s low-density residential districts dropped by 220,000 over the past 20 years while the city’s population grew substantially. To help rectify this, the municipal government has instituted a new vacant home tax, but more measures are needed.
Current property-tax structures, for one, could be changed to increase beneficial turnover in the real estate market. In many cities, property taxes are kept relatively low, with a premium levied on the purchase of property instead.
These closing costs can push houses out of range for many aspiring homeowners while incentivizing current residents to stay put once mortgages are paid off, even as household size dwindles. As reported by the Ontario Association of Architects, this leads to a mismatch between empty bedrooms and crowded housing.
Raising property taxes, of course, is a hard sell to a voter base still dominated by homeowners. Indirect measures may be the only means. For example, rate increases are expected in many Ontario cities because of reductions made to development fees.
Outside of these fraught waters, there are less contentious measures available. The Bank of Montreal has outlined the effectiveness of many. For example, it urges that speculation taxes be extended to include owner-occupiers who flip their homes within five years.
The federal government has taken up another idea: ending countrywide the practice of blind bidding, where prospective buyers place bids while unaware of competing offers – though progress on the bill has apparently stalled.
The danger of political complacency is real and mounting. When we treat our land as a commodity instead of an essential part of our nation, we risk great cultural harm. As movingly detailed by the Syrian architect Marwa al-Sabouni, our sense of community suffers greatly when speculation takes hold and houses cease to be thought of as homes.
But there is no reason that Canada must be doomed to entrenched housing unaffordability. There are many tools that can help avert catastrophe.
Luckily for Canadians, our parliamentary system often guides important policy toward consensus, especially when compared with the struggles faced by our neighbours to the south. In this regard it is imperative that housing policy follow the same path.
As the British thinker Sir Roger Scruton observed, conservatives must sometimes set their free-market instincts aside in pursuit of greater cultural goals. In fact, all of us, regardless of political inclinations, must remember that our land is a fundamental aspect of our national identity, and like human life, it cannot simply be subjected to the cold mechanics of an untethered supply and demand system.
Home is too fundamental a thing for any person to be denied.