A "Sold" sign in front of a home in the York neighbourhood of Toronto. Cole Burston/Bloomberg via Getty Images
Canada’s wildly unaffordable housing sector is expected to continue heating up for the foreseeable future, and the country’s housing agency is expressing concern. The housing sector across the country is facing a “moderate” degree of vulnerability to instability and is showing signs of overheating, the Canada Mortgage and Housing Corp. announced on Thursday. The agency added the cities of Toronto, Halifax, and Ottawa to its list of highly vulnerable cities as home prices continue to soar in major cities and smaller suburbs alike due to low interest rates and high demand.
Last week, the Canadian Real Estate Association predicted that 2021 would set a record for the number of homes sold and the average home price will jump by more than 16 percent.“Demand is exceedingly strong, inventories are generally low, and property values have soared to levels far outside historical norms,” wrote RBC economist Robert Hogue in a research note published on Wednesday. The situation has made Canada one of the most expensive places in the world to buy a home. And younger and lower-income Canadians being pushed further out of the market, with some research showing it could take a typical young Canadian up to 24 years of full-time work to save a 20 percent down payment in some cities.With a potential federal election on the horizon—and the Liberals’ first budget in two years being tabled next month—housing affordability is set to be a top priority. VICE World News asked federal leaders and housing experts to weigh in on what can be done to deal with soaring housing prices.
Experts and politicians alike agreed that government interventions, in some form, could ease the scorching housing market and promote housing affordability. They diverge in their assessments of whether the federal government has gone far enough.VICE reached out to the major national federal parties to discuss solutions to housing affordability. Ahmed Hussen, the Liberal’s Minister of Families, Children and Social Development, cited the government’s National Housing Strategy, which has dedicated $70-billion over 10 years and is billed as a way to “create affordable, stable and livable communities” through new construction and engagement with provinces and non-profits.“It's stable, predictable, long-term, and substantial money,” Hussen said in an interview. Last fall, the Liberals introduced its Rapid Housing Initiative, a $1 billion one-time program in response to the pandemic that funds the construction of quick turnaround affordable housing projects. ‘Housing in Canada is typically considered affordable if it costs less than 30 percent of a household income before tax.
“The target for that $1 billion was to build 3,000 affordable housing units,” Hussen said. But that target will be exceeded to 4,777 affordable homes, nearly 40 percent of which are in Indigenous communities. Brad Vis, Conservative MP for Mission, B.C. and the party’s housing critic, told VICE World News that the rapid housing initiative exists due to flaws with the major funding envelope of the national housing strategy in getting money out the door. Vis said that while he commends the rapid housing initiative, “the only reason they did it is because their major fund is not working.” He added that there are too few purpose-built rental buildings in Canada, and “we're not seeing enough get on the market fast enough.”For Jenny Kwan, NDP MP for Vancouver East and the party’s housing critic, the Liberals’ housing strategy falls short. “The housing crisis has escalated with more people in a homeless environment,” Kwan said in an interview. And this is, in part, a symptom of rising housing costs, she said. “At the very minimum, the federal government can actually reintroduce a 30-year term to the CMHC insured mortgages for first-time homebuyers,” said Kwan. “That will provide some relief for first-time home buyers to get into the market. That’s something that’s within their power to do so, and they still haven’t done it.”
At the end of 2020, the Liberals said they planned to impose a speculation tax on foreign buyers sometime over the next year as a way to help lower housing prices. Trudeau also made a similar pledge during the election in 2019, saying that it would be modelled after British Columbia’s foreign buyers’ tax. B.C. has said its speculation and vacancy tax, introduced in 2018, has brought in more than $115 million and has been credited as a factor behind a 5.6 percent dip in home prices in early 2019. However, experts say such taxes, in themselves, are not going to solve the issue of affordability.
Still, Kwan said it would be a welcome measure, if it indeed is pursued. “I think it's a little late in the game,” she said. “We'll see whether or not it comes through… I’m not holding my breath.”She added that Canada can learn from measures pursued by other countries that are grappling with similar issues. This week, New Zealand Prime Minister Jacinda Ardern announced her government would be targeting property speculators, which have been blamed for fuelling housing prices there by more than 20 percent over the last year. Investors accounted for nearly half of home sales this February, an all-time high. New Zealand’s measures include an automatic tax on house sale profits if people sell their homes within 10 years (up from five), and halting the ability to write off the costs of interest on mortgages for investment properties.Annamie Paul, the leader of the Green Party who’s seeking the nomination for Toronto Centre, said the party also wants to see a strengthening of regulation of foreign investment in residential real estate and the creation of an empty home tax for foreign and corporate residential property owners who leave buildings vacant
“Let’s use all of the regulatory tools at our disposal to disincentivize speculation, to disincentivize the commodification of residential real estate,” Paul said in an interview. For Vis, a speculation tax on foreign buyers is “definitely something that needs to be discussed” and that he and the Conservatives are currently “looking at all measures to address the rising housing costs.”However, John Pasalis, president of Toronto real estate brokerage Realosophy, said that even if such a national policy comes into place, it would likely only impact markets that have a lot of investors. “Markets like Calgary or Edmonton, where you don’t have tons of investors driving up prices, are not going to be impacted as much,” Pasalis said in an interview. “It’s the markets like Toronto and Vancouver where people have basically made a business of buying and hoarding single family houses.”Pasalis said that even just the prospect of looming measures that target investors can have a cooling effect. “But the government is probably going to do something. Canada’s housing market, it’s on its own level right now, accelerating way faster than any other country in the G7.”The federal department of finance would not answer questions from VICE World News about whether the government would be following through on a foreign buyers’ tax. “We continue to closely monitor the health and stability of the housing market,” a department official said in an email.
Jeff Nader is one of the founders of The Habistat, an online platform that compiles and compares Canadian housing data, and advocates for “stable housing markets that work for the average person.” The group recently launched a petition, with nearly 2,000 signatures, calling on policymakers to “recognize the housing affordability crisis that exists today in Canada.”Nader said while Bank of Canada policies such as lowering interest rates have helped drive up the price of homes, another big issue for him is the bidding wars that are driving home prices up even further—and are shrouded in secrecy.“If you’re a bidder, you don’t know what the other bids are, you just know how many there are. Someone is going to go way up above the asking price, and then that becomes the next comparable in the neighbourhood,” Nader, who is a data analyst, told VICE World News.“It creates a snowball effect. And I think that’s the big thing that has taken the government policies, which increased valuations, and just made prices explode,” he said. “The fact that people are just throwing blindly to get a house without caring so much what they paid for it, as long as they get it.”
Over the last year in particular, bidding wars have been fuelling skyrocketing prices in smaller markets outside of major cities. House prices in Barrie, a city an hour-and-a-half outside of Toronto, have soared by an estimated $100,000 in recent months, with similar trends playing out in other suburbs in the Greater Toronto Area. “The market failure that can create is one where there is price distortion created by incomplete information, where people aren’t really paying the true value of the house because they are into a bidding war,” Barrie’s mayor told the Globe and Mail this week.In 2018, the Ontario Real Estate Association asked the province to allow agents to be able to disclose officer prices on top of disclosing other details including closing dates and conditions to other potential bidders in a multi-bidder situation. But that never came to pass.Nader said some sort of online system for bidding information could potentially help cool the market—and could be done at provincial or local levels.
Canada’s economic growth has long been deeply dependent on real estate—and has been likened to an “addiction”—something that has been further amplified in the wake of the pandemic. Residential investments made up nearly 10 percent of Canada’s GDP by the end of 2020. “The housing market is irrepressible,” Export Development Canada’s chief economist Peter Hall told The Financial Post last month. “I don’t think it’s sustainable at all. We are in a compromised position because of our indebtedness.”The situation is also alarming for Paul who said “modern economies should never be overly dependent on any particular sector. The key is always to ensure that there is economic diversification.”For her, dealing with Canada’s soaring housing prices must come with greater investments in jobs and innovation.“We should be investing in a green recovery, and the green recovery is exactly where the jobs of the future lie,” she said. “And in the case of Canada, it’s even more desperately needed because whether it's over-dependence on real estate or the over dependence upon extractive industries, like the fossil fuel sector, Canada is getting behind in terms of having a truly diversified portfolio within the economy so that it's not at risk of economic shocks that come with that over-dependence.”Follow Rachel Browne on Twitter. This story has been updated with comment from the Conservative Party.