Politicians don’t usually need to be told to focus on the short term, but Finance Minister Chrystia Freeland is facing a public demand for urgency.
She has said the mini-budget she will present Tuesday will focus on housing and affordability. But the question many will be asking is when – when will the government’s affordability measures make a difference?
The rising costs of food and shelter over the past year are making things tough, right now, for the very people Prime Minister Justin Trudeau always promised to help. So the political test for Ms. Freeland’s fall economic statement is short-term relief for the middle class and those struggling to stay in it.
On housing, she can put forward measures to increase homebuilding, but they will take years to make a difference, and the Liberals haven’t yet screwed up the courage to tackle some of the measures that would have quicker impact. And on food prices, the government doesn’t have a lot of levers to reduce prices – so it will put on a show.
The Liberals have talked up the need to increase competition in the grocery sector, but their proposed competition law, Bill C-56, is not revolutionary and certainly won’t have an immediate effect.
Expect the Liberals to hype up the pantomime that began in September, when Industry Minister François-Philippe Champagne summoned grocery-chain CEOs to browbeat them into “stabilizing” prices under the threat of taxes. The grocery chains are easier targets after last week, when Loblaw Cos. Ltd. L-T and Metro Inc. MRU-T reported big increases in quarterly profits.
Ms. Freeland’s fall economic statement is likely to notch up that campaign, perhaps making a code of conduct mandatory, or requiring grocery chains to publish price markups, or outlining potential taxes.
Those things won’t halt food inflation – which is already slowing – but the Liberals hope grocery CEOs might see the PR value of tightening margins for a few months. In the meantime, the Liberals can gain from chastising them.
The government’s efforts to tackle the housing crisis are more substantial, but the problem is most of them won’t have a noticeable effect for years.
Mr. Trudeau’s government rolled out several measures this fall, including a GST break for rental housing and “housing-accelerator” agreements with municipalities that would see them alter regulations in return for funding. The Liberals can now at least make the case that they see the problem and they’re on it.
Tyler Meredith, a former policy adviser to Mr. Trudeau, thinks the government will want to follow the “success” they’ve had with housing-accelerator agreements by expanding efforts to encourage municipalities to change, perhaps even by setting conditions on federal infrastructure spending.
Ms. Freeland might also adopt housing-financing incentives to encourage private-sector and pension-fund investment, or offer loan guarantees for some projects, Mr. Meredith suggested. She could signal direct plans to develop housing on federal lands or have the Canada Mortgage and Housing Corp. develop affordable housing – which would also mollify the weakened Liberals’ parliamentary allies in the NDP.
Those things would address the long-term shortage, and fit with Ms. Freeland’s plan to focus on “supply, supply, supply.” But they would not have a rapid effect.
To “move the needle” quickly, Ottawa could set constraints on short-term rentals, such as Airbnb, so more units would go into the housing market, housing analyst Ben Rabidoux, founder of North Cove Advisors Inc., said in an interview.
But Mr. Rabidoux also rejected Ms. Freeland’s suggestion that the housing crisis is entirely a supply issue.
He said the federal government could have an immediate impact by signalling that Ottawa will cap the unprecedented growth in temporary residents – temporary workers and foreign students – that added 730,000 people last year.
“If they did something like announcing that they would curtail temporary resident growth, you’d start to see some of the froth come out of the investor-led demand in the market,” Mr. Rabidoux said.
There’s no sign the Liberals are ready for that. Immigration Minister Marc Miller plans to press provinces, notably Ontario, to crack down on abuses by private colleges that are doing booming business with foreign students but he has shied away from capping the numbers.
And unless Ms. Freeland puts forward measures that offer an immediate impact, her housing-and-affordability mini-budget won’t answer the question Canadians are asking.