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Uzelman: The Federal Liberals and the chasm between housing supply and demand

A column by Bruce Uzelman
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~BW Uzelman

The housing affordability crisis is a serious and pervasive problem. Ontario and British Columbia have most actively addressed the issue, but all provincial governments have taken too long to react.

The federal government has been even more tardy. The Liberals proposed the $4 billion Housing Accelerator Fund in the election campaign in August of 2021. The “Accelerator” program was unsuitably named; it was eight months into the Liberals’ mandate before it was introduced in the 2022 Budget, 14 more months for the application portal to open and yet another three months for the first agreement with a municipality. In those 25 months, the housing shortage burgeoned into a severe housing deficit.

The Fraser Institute has just released a housing study. Josef Filipowicz, senior fellow at the institute, wrote, “Never in the past half-century has population growth been so much higher than housing completions in so many parts of the country than in 2022.”

Canada’s housing crisis is a result of escalating demand and stagnating supply. A rapidly growing population has fueled demand, while government policy deficiencies have depressed housing construction. The Liberal government, first progressively, and in 2022 massively, increased the number of immigrants, foreign workers and foreign students admitted to the country. As well, governments at both levels have focused on helping buyers get into the housing market. These actions have pumped up demand, while government measures to supplement supply were absent.

Predictably, both housing availability and housing affordability have strikingly deteriorated. As more people competed for too few homes, vacancy rates (in the post-pandemic period in particular) have neared zero in many provinces, and home prices and rent have risen substantially. High interest rates have further driven up housing costs. The CMHC estimates that 5.8 million homes will have to be built by 2030 to restore the levels of affordability existing in 2003/2004.

The Fraser Institute research compares annual population growth with housing completions in the previous year. Filipowicz’s data (garnered from Statistics Canada) shows from that from 1972 to the mid-2010s, population growth was one to two people per housing unit completed. From the mid-2010s to 2021, it was two to three people per completion, the only exception being the pandemic year of 2020. In 2022, population growth was a whopping 4.7 times the level of housing completions.

With the policies the federal Liberals had introduced, and had not introduced, the market was destined to fail. Only when public and opposition party pressure peaked and when the Liberals trailed the Conservatives by double digits in the polls, did they get serious about spurring housing supply. Then, in the autumn, there was a flurry of Housing Accelerator Fund agreements with municipalities, and the government soon created a GST exemption for new rental housing projects. These are the correct policy responses, but the Liberals had to be forced to deliver them, and they arrived much too late to alleviate the acute housing shortages and affordability problems visited on Canadians from 2021 through 2023.

PM Trudeau, earlier in 2023, drew criticism for stating that provision of housing is largely a provincial responsibility. He was correct. Housing primarily falls within provincial jurisdiction. But it is the federal government which controls the admission of immigrants and foreign workers and students. The Liberals have steadily increased admissions since 2015, and in 2022 they more than doubled the 2021 number, admitting over 1 million people. If the government was determined to engineer this escalation, it had a responsibility to help solve the pan-Canadian housing shortage. It has neglected this duty far too long.

It will not be the first time a federal government has intervened to develop housing. But the Liberals need to be careful to respect provincial jurisdiction. The GST exemption is the correct tool in this regard. It will do little to distort provincial policy, and will likely support the targets of provincial programs.

Benjamin Dachis of the C.D. Howe Institute urges the federal government to “tread lightly” with Accelerator funding. He writes, “Direct intervention on city-by-city zoning decisions would be unwise and would likely only worsen the housing crisis.” BC and Ontario already develop municipal housing targets and monitor achievement. Dachis suggests that the federal and provincial governments develop the targets together, and award Accelerator funding only to those meeting the targets. This is smart policy. It would avoid conflict between federal and provincial criteria and protect provincial jurisdiction.

Ottawa should also seriously consider stemming population growth for a time, until housing supply catches up with demand. This is unfortunate, but is now necessary. Lastly, all provinces would be wise to emulate the Ontario and BC models to boost housing supply. Those or similar policies are essential.

bruce

Bruce W Uzelman

I attended the University of Saskatchewan in Saskatoon.I obtained a Bachelor of Arts, Advanced with majors in Economics and Political Science in 1982.

I have maintained a healthy interest in politics throughout my adult years, and wish to put that and my research skills to work as a political columnist.

Contact: urbangeneral@shaw.ca

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