Minority Liberals may find much to like in the NDP’s affordable housing plan
Earlier this week, Canadians voted a minority Liberal government into power. While Canadians for the most part agreed on the challenges facing the nation, such as the environment, the economy and housing affordability, they could not reach a consensus on which political platform was best equipped to combat them.
The result is a hung parliament. Some may wonder whether a minority Liberal government will be better able to cope with housing challenges when housing affordability worsened under a majority Liberal government.
In an earlier column, we reviewed the housing platforms of the leading parties and found pragmatic solutions across party lines, and we believe the Liberals would be wise to take the split mandate as an opportunity to explore ideas and workable solutions no matter the source.
One of the biggest concerns for the middle class has been the rapid increase in housing prices and rents since 2015, especially in populous urban centres. As housing prices and rents increased out-of-step with incomes, many Canadians felt the pinch.
Even more affected are those households that cannot afford the cheapest rents and must rely on subsidized public housing. The supply of subsidized housing or other units for which rents are geared to income has not increased sufficiently even when the demand has. At the same time, inadequate funding by different tiers of government has resulted in rapid deterioration of the structural quality of public housing.
The Liberal government in its last tenure realized the importance of investing in public housing and through its National Housing Strategy has committed billions of dollars to refurbish public housing stock in places like Toronto.
At the same time, for market-based housing, the Liberals launched a new program where shared-equity mortgages would partially assist 100,000 first-time homebuyers with down payments. Other programs are targeted to increase the supply of new owner-occupied and rental housing through financing initiatives and making surplus federal land available for housing.
Lastly, the Liberal government supported the tightening of mortgage regulations to instill financial discipline among borrowers and lenders, which also halted the rapid escalation of housing prices.
But were these interventions enough?
The scattered approach — with several initiatives spread across jurisdictions and market segments — may not be successful in delivering scaled programs needed to address the worsening of housing affordability in Canada.
At the heart of the problem lies the challenge with housing supply. Whereas the Canadian population, as a result of planned immigration, has been increasing at a steady pace for decades, the supply of new housing has not kept pace.
In part, that is because while population growth doesn’t suffer much during economic slowdowns, housing construction does.
Housing starts are considered a leading economic indicator such that they often decline ahead of economic slowdowns and rise ahead of economic recovery. However, starts can decline rapidly when a downturn sets in, while the recovery is often slow.
As the population continues to grow, the decline in housing production during slowdowns creates a housing deficit that is compounded over successive economic downturns. This causes an increase in unmet housing demand that worsens over time. Furthermore, taxation and rental housing policies may result in a higher decline in rental housing construction than for owner-occupied housing.
The new Liberal government is likely to partner with others to carry its agenda forward. The New Democrats (NDP) are the likely partners to buttress the minority Liberal government. Unlike the Liberals, the NDP electoral platform embraced fast-tracked supply-side solutions and promised to build 500,000 new housing units as a priority. The Liberal platform promised 100,000 units over 10 years.
The new Liberal government has a unique opportunity to re-evaluate the National Housing Strategy to determine how a supply-focussed approach to housing challenges will provide relief. But this will require the new government to realize that the steps taken to date have been beneficial but certainly not sufficient to deliver scalable solutions.
What is needed is for the Liberal government to form new and collaborative partnerships with provinces and municipalities as well as the private sector to build tens of thousands of homes at an accelerated pace that are deemed affordable across the earning spectrum of the middle class.
Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.