Can the Next Canadian Government Solve the Housing Crisis?

Wahi asks policy researchers if a change in federal governance can usher in a solution to the ongoing affordability crisis and, if so, what does it look like?   

By Josh Sherman | 4 minute read

Economic and housing specialists are offering up solutions to the Canadian housing crisis.

Housing is understandably a top priority for Canadians headed to the polls later this year to elect a new prime minister — but whatever the electorate decides, Canada’s next federal government faces a tall task.

Lower interest rates and declining rents have helped ease affordability pressures recently, though the numbers suggest there’s still a long way to go. According to analysis from National Bank, to qualify for a mortgage on a median-priced Canadian home, a household income of $186,963 is required (roughly double the national median). Meanwhile, more than one-in-five Canadian households are living in unaffordable housing, which Statistics Canada defines as spending 30% or more of their income on shelter. 

With no election date set and the governing Liberals in the process of selecting a replacement for outgoing Prime Minister Justin Trudeau, the major parties’ housing proposals are still taking shape.

But as politicians continue to float new affordability fixes in a bid to win voters over, Wahi spoke to three policy and economic researchers to find out what they say needs to be done and whether or not they think the next government will take the necessary action.

Spoiler alert: researchers suggest a regime change isn’t likely to restore affordability, but at least some say new leadership could make meaningful headway in the battle to curb sky-high housing costs across the country.

Here’s what they told Wahi. 

Moshe Lander, Senior Economics Lecturer at Concordia University

Economics Professor Moshe Lander, doesn’t expect that new federal leadership will turn the tide of affordability. That’s because, he says, it isn’t their job to begin with. “In general, regardless of the party, housing is not a federal matter,” Moshe Lander, senior economics lecturer at Concordia University, tells Wahi. Lander sees federal political promises as a shallow attempt to appeal to voters. “So any of the parties that are trying to insert themselves into the conversation are probably doing it more for political gain than the intent to actually accomplish anything,” he continues. 

In Canada, Lander says, the primary issue rests at the city, or municipal, level. The supply crunch he suggests is fueling the crisis stems from restrictive — and entrenched — local zoning rules. These policies limit the type and amount of housing that can be constructed from place to place and are generally set by municipal councils, although there are also planning policies at the provincial level.

To alter these rules to the extent necessary would draw the ire of existing homeowners concerned with their property values. These homeowners happen to be an important voter demographic, Lander suggests, so any federal party that’s elected probably won’t want to alienate them by tampering directly or indirectly. “Existing home owners are an effective lobby blocking any loosening of those laws,” he continues, adding there could be the threat of legal challenges from this group as well. 

Yushu Zhu, Assistant Professor of Urban Studies and Public Policy at Simon Fraser University 

Yushu Zhu, whose research has appeared in a variety of peer-reviewed journals, doesn’t foresee the next federal government restoring affordability either — but she disagrees with Lander about the why. “It’s not because most housing responsibility sits with the municipal governments,” she says. “I would say the senior governments have more accountability to the housing crisis that we have now,” Zhu continues.

One major problem, she says, is that Canada’s highest level of government isn’t spending on social housing and other forms of non-profit housing, such as co-operative housing, like it used to. The 1993 federal budget slashed these supports, and it wasn’t until the early 2000s that national leadership paid any attention to the segment: “There’s about one decade where there’s no federal government involvement,” says Zhu.

Consequently, just 3.5% of the country’s supply of homes is social housing, compared to the 7.1% average across the 38 countries that make up the OECD. “That share [of social housing] has continuously dropped over time, but on the other hand, you see greater need for affordable housing,” says Zhu. “We are seeing more younger people — and even some middle-income family households — who are in need of those social and non-profit affordable housing, which are stable and secure for them,” she adds.

At least doubling the portion of social and non-profit housing is one of the keys to solving the housing crisis, yet Zhu isn’t confident this is going to happen post-election. “I don’t expect any fundamental changes in terms of mindset, in terms of the major parties.”  A culture of homeownership persists in Canada, one that has been built up over generations. “We are still a highly commodified housing system,” she says.

Mike Moffatt, Executive in Residence at the Smart Prosperity Institute

Fresh federal leadership may not relegate the crisis to the history books, but Economist Mike Moffatt suggests the situation could be meaningfully improved — and within a single term. “I don’t know if they can solve it, but I do think we could be in a much better place four years from now than we are today,” says Moffatt, also an Assistant Professor in the Business, Economics and Public Policy group at Western University’s Ivey Business School.

He suggests responsibility lies with all levels of government. “When you get to the question of which government is responsible for fixing this and what should be done, I think the question comes down to what you believe the root causes of the issues are,” he explains.

It’s true that prohibitive zoning may fall largely on the shoulders of lower levels of government, he says, but that’s just one part of the affordability equation. “There are a lot of other causes [to the crisis], one obvious one being rapid population growth, with immigration and international students and so-on,” Moffatt tells Wahi. “That’s almost entirely federal responsibility,” he continues, noting the current Liberal government has taken recent steps to reduce immigration targets but lots more must be done. “It’s going to take a combination of enhanced homebuilding through a variety of not just federal but provincial and municipal policies coupled with further immigration reforms,” Moffatt explains.

Some of these policies include lower-tier changes including cutting more red tape through zoning reform and reduced development charges. However, the feds could play a more substantial role here by reforming the $4.4 billion Housing Accelerator Fund, which provides funding to municipalities in exchange for allowing increased density. While generally supportive of the fund, Moffatt says a number of tweaks are required to make it more effective, including barring participating municipalities from hiking fees levied on developers.  “The core idea is sound,” he says of the fund.

Eliminating GST on the construction of new homes, something the Conservatives have proposed, would also go a ways to boosting housing supply. “That would be a big one,” says Moffatt, though he doesn’t like how they’re proposing to fund the cuts: by scrap the Housing Accelerator Fund.

In terms of immigration, federal policymakers could kill two birds with one stone by focusing on bringing in more tradespeople, who in turn could help alleviate a skilled-labour shortage that’s adding to construction costs. “We’ve brought in high levels of international students who study things like fundamentals of tourism, which is probably not going to help us fix the housing crisis, but if we can bring in more electricians and plumbers and drywallers, that’s probably going to help.”

Of course, even if all of these policies come to pass, the road to Canadian housing affordability. “It’s such a large hole that we’ve dug ourselves over the past 40 years,” he says. “It’s not the kind of thing that’s going to happen overnight.”