Why Affordable Housing Policies Have Failed

Housing policy will not match housing demand


Canada now plays host to 807,750 foreign students, 770,000 temporary workers, and 500,000 new immigrants being admitted annually. As a group, they represent mass immigration. Most of these people settle and are concentrated in a few parts of Canada, nowhere more so than southern Ontario and southern BC. Their numbers are rising annually and the 500,000 new immigrants drove our population over 40 million this year. We have the fastest growing population in the Group of Seven (G7). Since 2002, immigration, excluding students and temporary workers, has totalled 5.9 million.

Such large numbers of people present extreme challenges to our supply of housing, the process of reducing greenhouse gas emissions, delivery of health care, already inadequate social and physical infrastructure, farmland, and biodiversity, to name a few existential challenges. The following report will target housing shortages challenges as a function of increased demand due to mass immigration.

A known but unspoken fact

Pundits such as ex-governor of the Bank of Canada Steven Poloz, housing economist Mike Moffatt, journalists in the Globe and Mail and Financial Post, among many others, all agree that the number one reason for our housing availability and price crisis is population growth.

Unfortunately, they also believe federal policy supporting high immigration levels will be good for us.

It is not likely to be good for us. To be blunt, it is a government policy, and we know how well our federal and provincial government policies often work out. Immigration will continue to surge, but we do not and will not have the capacity to absorb them all. The housing shortage is a glaring case of crippling incompetency of the federal, provincial governments.

Even the economic and journalistic class do not seem to have a clear handle on matching housing supply to demand to economic indicators.

We all suffer from the housing crisis, but some suffer more than others. The impact spreads all across our economy. As housing demand greatly exceeds supply this creates a barrier to our children’s aspirations, changes family structure, leads to homelessness, robs non-housing sectors of our economy — on the other hand, it makes banks and developers rich.

The harms from high housing costs

The standard advice for home budgeting is to use only about 32% of income on housing (rent or mortgage, plus insurance, property tax and so on). A typical household now spends 60% of their

income on housing, up from 40 per cent in 2002. New entrants into the housing market — read young adults — have less to spend on other necessities. And that assumes they are able to afford a condominium or freehold residence. There is the rental route, which is a reasonable option, but rents are highest in places with the most mass immigration.

And rents will continue to rise as new laws in Ontario allow landlords to raise rents at will on new builds. As an aside, this new law in Ontario has been in place for over four years and has not changed the rental picture, in part because even where more rental units are built, they are gobbled up by growing numbers of mass immigrants, particularly students and temporary workers.

Supply and demand

In Ontario, in the five years before the pandemic, Mike Moffatt states that enough homes were built to handle a population increase of about 600,000. But we took in about 1 million new residents, not including temporary workers or foreign students. House prices rapidly increased as a result; anyone in small town southern Ontario, South BC and Vancouver Island, knows this to be true. It’s simple economics: When demand exceeds supply, prices go up.

After 2019, the population surge slowed a bit, but it continued. And then the pandemic hit. Interest rates decreased, government money flooded the market, people were saving money on commutes and not taking holidays. As a result, people with means were moving out of their small homes for something roomy. The prices kept rising. And here we are today. Mike Moffatt’s report, titled Baby Needs a New Home, October 2021, was funded by the Ontario Homebuilders’ Association. It is a good read.

Clearly this is a failure of not just the Trudeau Liberals, but the Poilievre Conservatives, the Singh NDP, and sadly even the so called ecologically-minded May Green Party, not to mention compliant provincial governments. All these parties support mass immigration. To be clear provinces have the constitutional ability to control immigration. Maxime Bernier does not agree with mass immigration, but unfortunately, some of his policies are fueled by some conspiracy driven beliefs. Time for you citizens to inform yourselves and push back. Read on.

The real housing needs, from the experts

The Canadian Mortgage and Housing Corporation (CMHC) figures we need to build 5.8 million housing units by 2030 to bend the house price curve down. (This figure exceeds other numbers proposed by planning consultants such as Hemson in Ontario and the Ontario government.) The CMHC projects that at the national level, and at current rates, new housing construction will add 2.3-million homes by 2030. So, we need an additional 3.5-million AFFORDABLE homes by 2030 to reach the necessary 5.8-million mark in Canada. The CMHC report states Ontario will need 2.4 million to 2.62 million new homes to meet demand by 2030. Doug Ford’s government currently commits to 1.5 million new homes by 2030, which will fall well short of the demand cited by the CMHC, by 1 million new units.

When the numbers are wrong

The concern about these above figures is the discrepancy. Which is the truth? Even if a home building target could be agreed upon by your governments, do not count on it being achieved. New Zealand also enables mass immigration, resulting in similarly high house prices, and homelessness. So, the national government instituted the Kiwi Bild scheme in 2018. It was dumped a year later because few new builds occurred.

The policy was replaced with other questionable measures. What did encourage more homes to be built in New Zealand was 2016 zoning reforms that encouraged more building of multi-unit building, but also more detached homes. At the same time, though, prices increased even as supply increased.

In New Zealand, immigration levels continue to rise, up zoning rules have resulted in more residential units being built in Auckland, and home prices have only recently dipped in Auckland. This is a function of tax changes to discourage investment, along with interest rate hikes. But the housing is not affordable for most residents despite slight price declines.

The lessons are: Do not count on government policies to produce outcomes that are predictable and which make the future housing market affordable or sufficient to meet demand. Building massive government subsidised home projects may be the answer to the issue of affordability, but our governments do not have the fiscal capacity to undertake this. So, mass immigration will continue to increase home prices, decrease availability, increase social/physical infrastructure demands, and degrade ecological parameters.

To the densification enthusiasts: Be careful what you ask for. More multi-unit housing comes with more detached housing. Also be aware that when single homes are torn down, tenants who live in many of these homes are out and back looking for a rental. There are considerable housing supply backlogs that have been building for perhaps decades and new supply is not an easy solution.

New housing creates other demands

Turning to Canada, even if we build all the homes necessary — and nothing from the past 20 years indicates we can — will the homes be in the right places; will they be the right size; and will they be affordable? And then will the services be available for such a large building increase? Who will bet their money that the new homes will have health care services, long-term care services, court translation services, police services, public transit services, entertainment services, public schools, home care, green space, natural parks and conservation areas, water, and sewage? Not likely. And so, these new homes will be grossly under-serviced, and the quality-of-life will decline for the existing residents.

Just in the last month, the planned and desperately needed 20-acre green space in the Toronto rail lands was turned down in favor of three mega towers. This means more people, and less mentally and physically invigorating green space.

The evidence is already here

Why the pessimism? First if you grew up in Toronto, for instance, in the last half of the 1900s you will have noticed the decline in most public services. You will have witnessed the constant struggle to get all levels of government to fund new infrastructure in unison. Households in Canada, provincial governments and the federal government all are carrying unprecedented or significant debts, making funding of the above-named services near impossible.

According to Infrastructure Canada, the federal government’s share of public infrastructure has declined in the last 50 years — in the case of roads, water, and water infrastructure, a decline of 70% to 80%. Does this not sound familiar, where, like infrastructure, the federal government’s support of health care is declining?

So, who will fund the services? Certainly not the developers or banks or realtors.

And it will not be the municipalities because in Ontario, Doug Ford’s provincial government has cut the development charges municipalities can charge for new buildings, effectively leaving even greater infrastructure deficits.

The great greenwash

There is a lot riding on the year 2030. It is the year we must reach staggeringly optimistic greenhouse gas (GHG) reduction goals, 30% percent biodiversity goals, as well as building 5.5 million new homes. I ask you, is 5.5 million new homes not going to make our GHG goals frankly another Liberal, Conservative, NDP or Green lie?

Housing, and its supporting infrastructure, is full of steel, concrete, wood, aggregate and petrochemicals. This staggering build-out will lead to more GHG emissions, more mines, more northern roads, more forests cuts. Even densification, the anthem of the woolly left and perhaps the well monied right will ensure that biodiversity declines, farmland is lost and the climate changes. Homes, even if smaller, consume energy and the people in them consume goods, food, and public/private services.

I do not agree with Mike Moffatt’s belief, or any of the other corporate, government or so-called progressive economists that we need mass immigration. But he at least analyses the consequences of mass immigration. He clearly has identified that the expense of homes is affecting family formation. In Ontario, the number of people in the 15-to-34 years age cohort is less than the rest of Canada’s provinces, except the northern territories. That means that while young adults in Ontario stay out of the housing market, they are delaying having children. You will find a similar drop in BC. Both these provinces have the largest immigration rates. That is very sad.

We have this innate fear of declining population, but the solution, mass immigration, is fraught with problems. But it seems that hired lobbyists, hired journalists and hired economists and the kind but naïve minded do not want to talk about immigration. In a recent Television

Ontario, TVO episode of the Agenda a panel of public and private sector representatives were discussing the topic of affordable housing. All the panel members only discussed increasing housing supply. Steve Paquin, the respected host, finally said that he had to ask the question, why not reduce the demand. In other words, decrease immigration. Steve Paquin said that his email inbox was full of viewers that were asking this question. Perhaps the commercial sector, their lobbyists, hired experts and compliant political operatives are all working in tandem and so the obvious is ignored.

Economic failure, in spite of immigration policy

To pile on the woes, the OECD has projected that the Canadian economy will be lowest performing economy among the 40 rich world countries and will continue that way until at least 2060.

If mass immigration was the solution to economic stagnation, then the sheer volume of mass immigration numbers should have boosted economic performance already. After all, we have 5.9 million more immigrants in Canada than we did in 2000. Hardly a glowing recommendation for mass immigration as a solution to our economic challenges. Nor does it seem to help our laggard economy build millions of affordable homes, transform our energy economy to net zero by 2050 or build the infrastructure that can sustain a rapidly growing population.

As a certainty do not count on any level of government to afford a grand national subsidised housing program.

As we spend more money on housing and less on other sectors, our productivity drops; and it has been dropping for years. So how can a family, spending 60% of their income on a home, afford, good food, skill training for a job, a heat pump, a new Apple virtual reality headset, or a vacation to a park? Higher house prices mean higher inflation and higher debt to income ratios. That affects our economy.

Affordable? For who?

Ending single home residential zones in favor of multi-unit residences will not make homes accessible for the middle class, let alone the economically poor. A detached home now costs about $1.5 million in Toronto, $2 million in Vancouver or $700,000 in Orillia. By the time a developer buys that home with the intention of building a four-plex, $175,000 to $500,0000 (depending on where the tear-down is located) is already baked into the cost of each new unit. After technical costs, financial carrying costs, a very slim profit, and building costs, those so-called affordable units will likely cost at least $800,000 to $1. million a unit, based on a 1,500-square-foot size, at $400 per square foot. With 20% down and a 5.09% mortgage, that would mean a monthly payment of $3,990. A princely sum relative to the median income of $44,000 for millennials and $66,000 for 45-to-54-year-olds.

No, the news is not good.

Time to tell the emperor he’s naked

Do not trust the governments, even if they have a policy you may like. In the main they may care more about power to represent their friends like the wealthy, big banks, unions, and developers. At times and to be fair, these same parties roll out some useful programs which fall well short of need. Call it, inadequate catchup. Run for the hills when all the parties agree on the need for mass immigration.

Better yet, stand your ground and call all politicians out on the consequences of mass immigration. Do not let them quaintly tell you we are a country of immigrants (name me a country that is not, even the first nations immigrated), or we are aging and need new young blood (immigrant age profiles are not much different than ours), or the labour market is tight (really, they mean they want cheap, compliant labour and do not want to train Canadians in the trades and professions).

Of course, there are challenges with a constant or declining population, but there are benefits and solutions to help an aging population cope. In Japan, where their population is declining, house prices have declined and the citizens are coping with the challenges. The world is getting older, fertility is dropping and raiding other countries of their youth does not sound like a moral response.

The smoke in the atmosphere is real. Our political class and their policies are becoming hazy at best.

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