Recognize the housing affordability crisis in Canada
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We are calling on policymakers and others with influence to publicly recognize the housing affordability crisis that exists today in Canada.
Over the past few decades, there has been a dangerous trend of home prices becoming increasingly detached from incomes. Already at concerning levels prior to COVID-19, this trend has accelerated in 2020 and 2021 and has swiftly destroyed the hopes and dreams of many Canadians. Renters are falling behind in regards to building wealth, spending more than what is considered affordable on shelter costs, and spending years on waitlists for social and affordable housing. It does not take much searching to find thousands of stories of frustration, disappointment, and depression, from Canadians who feel that they have lost their opportunity to succeed in this country.
This petition does not focus on proposing solutions to the crisis but addresses the critical first step – nothing can be done if those in power turn a blind eye and fail to even recognize that a problem exists.
We have summarized our research that brought us to the conclusion that a housing affordability crisis already exists today in Canada. These details are being provided as a starting point for anyone who wants to become more informed before deciding on this petition. Please do your own research as well and get information from a variety of resources.
The sections of this petition are listed below:
- Summarizing the affordability crisis that already exists today
- Growing wealth inequality and the housing market
- The threat to broader economic stability
- How we ended up in this crisis
- Existing initiatives and why they are not enough
- A note to current homeowners
- Where we can go from here
Sign this petition if you believe there is a housing affordability crisis in this country and please share with as many people as you can. Email your MPs and tag them on twitter. Have conversations with family and friends. Use whatever social media platform you are comfortable with to help get this out there. This is an opportunity to make our voices heard and to demand change.
If you would like to get in touch, please email firstname.lastname@example.org
Our research and analysis can be found below.
Summarizing the affordability crisis that already exists today
In this section, we discuss the following:
- Housing need and waitlists for affordable and social housing
- Home prices growing increasingly detached from incomes
- The challenge of saving for a down payment
- Difficulty of qualifying for a mortgage that matches today’s prices
- The normalization of offers with no conditions and the risks to buyers
- Comparing against other countries
Statistics Canada released a report stating that 11.6% of Canadian households were living in core housing need in 2018. Statistics Canada defines core housing need as living in an unsuitable, inadequate, or unaffordable dwelling, and unable to afford alternative housing in their community. This report found that seniors living alone and groups designated as visible minorities were among the most likely to be in core housing need prior to the COVID-19 pandemic. The report also notes that this measure is much higher for renter households (23.0%) compared to homeowners (6.5%). The Toronto census metropolitan area had the highest rate, with 18.7% of households in core housing need. Looking at a second source – Canada’s National Housing Strategy (NHS) November 2017 publication noted there are 1.7 million people (530,000 families) in housing need, meaning that they are living in homes that are inadequate or unaffordable, and 25,000 Canadians who are chronically homeless.
Per CMHC, housing is considered affordable if it costs less than 30% of a household’s before-tax income. CMHC states that “households spending more than 30% of their income on housing are likely to experience housing affordability challenges”. Statistics Canada published a data table showing the percentage of households that spend more than 30% of income on shelter costs, based on the 2016 census. We noted the following key statistics:
- At a national level, 24% of households spent more than 30% of their before-tax income on shelter costs (16% for homeowners and 40% for renters).
- In Toronto, 33% of households spent more than 30% of their before-tax income on shelter costs (27% for homeowners and 47% for renters).
- In Vancouver, 32% of households spent more than 30% of their before-tax income on shelter costs (25% for homeowners and 43% for renters).
Already in 2016 there was a large percentage of the population paying more in shelter costs than what CMHC deems affordable. Better Dwelling shared an analysis that found in Toronto and Vancouver only 0.2% of rental units are affordable to the bottom 20% of households in 2020. We calculated the monthly mortgage payment for a benchmark priced home purchased in 2016 costing $484,000 and in January 2021 costing $669,000. There average discounted 5-year fixed mortgage rate in 2016 was approximately 2.26% and this rate was 1.39% in January 2021. Assuming a 25 year amortization period and a 20% down payment, the mortgage payments would have been approximately $1,690 for the home purchased in 2016 and $2,113 for the home purchased in January 2021. The monthly mortgage payment is much higher (by over $400, or 25%) for a home purchased in January 2021, considering the impact of lower mortgage rates and despite paying $37,000 (38%) more for a down payment. Lower interest rates will improve the ratio of shelter costs to income for existing homeowners, but new homeowners do not typically see any benefit due to offsetting gains in home prices.
Statistics Canada published data which summarizes the households who are on a waitlist for social or affordable housing in 2018. At a national level, 1.9% of households were on a waiting list with 1.2% being on a waiting list for two years or more. Breaking these numbers down further - 0.5% of owner households were on a waitlist (0.3% over two years) and 4.9% of renter households were on a waitlist (3.1% over two years). Below are additional statistics we observed for specific regions:
- Ontario – 7.6% of renter households on a waitlist (5.8% for over two years)
- Northwest Territories – 8.5% of renter households on a waitlist (5.8% overall)
- Nunavut – 25.0% of renter households on a waitlist (24.0% overall)
This data shows that in 2018, when the HPI benchmark price in Canada was approximately $565,000, there was already a significant percentage of households on waiting lists and most have been waiting for over two years. The January 2021 HPI benchmark price was $669,000, representing an 18% increase. Statistics Canada has not yet published rent cost data for 2020, but Better Dwelling shared analysis finding that 125,000 Canadians had rent in arrears as of October 2020. Looking at a specific major city for further context - this article (dated prior to the COVID-19 pandemic) states that the average wait time in Ottawa for Rent-Geared-To-Income (RGI) units is five years, with desirable properties taking as long as 19 years. If more people are pushed out of home ownership, this means more people who are looking to rent. With increased competition for rental units, this would likely drive rent costs higher.
While declining mortgage rates partially offset the impact of higher prices on monthly mortgage payments, the cash required for a down payment only grows with higher prices. With the national benchmark home price exceeding $500,000 in 2016 and earlier in some cities, the minimum down payment percentage has also increased. In Canada, the minimum down payment for a home under $500,000 is 5%. However, you must put down 10% of any balance from $500,000 to $999,999 and if the purchase price is $1,000,000 or more – the minimum down payment is 20%. This means that down payments are being driven higher by both rising prices and regulations which require a higher minimum percentage down. The result of these factors is that the time takes a median-earning household to save for the minimum down payment on a house is now the longest on record.
In many regions, the ratio of home prices to income has never been higher, and this tool lets you explore this data. Income is a key factor in determining the mortgage amount that a household will qualify for, so when they are not keeping up with home prices it can be very difficult to qualify for many homes in some cities. A mortgage stress test was introduced in 2018 requiring that buyers qualify at a 4.79% stress test rate even if their actual interest rate is much lower. So while the home being purchased is valued based on a much lower rate, the buyer must qualify as if they were paying a 4.79% interest rate, making it even more difficult to qualify for a mortgage. We recognize that the stress test is important as it can protect buyers and lenders in the scenario that mortgage rates go higher, but it still presents a new challenge. To go through some examples of what today’s salaries can afford, we noted the following 2018 statistics looking at both economic families and persons not in an economic family as provided by Statistics Canada: average income of $89,900, median income of $69,600, and 32.8% earning above $100,000. We used a mortgage affordability calculator provided by ratehub.ca to review various scenarios. Note that these are approximations only and other personal factors impact the amount of the mortgage someone qualifies for. For each of these scenarios we assumed that the buyer has no other monthly debt payments, a 25 year amortization period, and a mortgage rate of 1.60%.
- Gross income of $69,600 and down payment of $100,000 → maximum home price of $420,000.
- Gross income of $89,900 and down payment of $100,000 → maximum home price of $508,000.
- With a $100,000 down payment, the household income required to afford the January 2021 national benchmark home price of $669,000 was calculated to be approximately $125,000.
Now consider what percentage of individuals and households are actually earning the levels of income to qualify for even the benchmark home. We built a tool that shows what percentage of census individuals earn within each income bracket. To qualify for homes in many cities, it is extremely difficult as an individual. Even for couples, there would need to be at least one partner in the top income ranges or both partners in the medium to high ranges. If we look at the most expensive cities, the situation is even more disturbing. In Vancouver, the benchmark home price in January 2021 was $1.06 million, requiring an income of $200,000 and a minimum down payment of $212,000. In Toronto, the benchmark home price in January 2021 was $0.93 million. Since this is below the $1,000,000 threshold requiring a 20% down payment, one option to qualify for this price is an income of $200,000 and a minimum down payment of $68,000. With an income of $150,000 you could qualify with a down payment of $200,000 and with an income of $100,000 you could qualify with a down payment of $480,000. In Vancouver and Toronto, only 9% and 10% of census individuals earned over $100,000 in 2018. If a hopeful buyer cannot increase their income enough to qualify for the mortgage they want, their other option is to increase their down payment. However, even those who are saving as much as they are able can effectively have those savings wiped out by a single year of home price gains. How is it possible to come up with those huge down payments unless someone had realized large gains from the sale of existing property? If you want to look at more scenarios than we have laid out here, this calculator will let you estimate the number of years it will take to save for a down payment, based on the variables you enter.
The prevalence of sellers’ markets and intense bidding wars have created a situation where saving for a down payment is no longer enough. Offers with no conditions have been common for the past five years in certain hot markets such as Toronto and Vancouver. However, this has become the norm in more regions than ever across the country. There are significant risks associated with firm offers, which require a buyer to have an extra safety net of cash in case of expensive complications that may result. By submitting a firm offer, a buyer is foregoing their right to get financing approval, obtain a home inspection, have a lawyer review the condo status certificate, and more. If a buyer cannot secure mortgage financing in time, they will not be able to retract their offer. The potential consequences of this are losing their deposit (typically 5% of the value of the home), or even facing a lawsuit. If a buyer cannot obtain a home inspection, they could run into issues with the home that potentially cost tens of thousands of dollars to address. In regions where offers with no conditions are the norm, it is inherently a good time for someone to sell their home that they know has expensive issues – and the price they receive for the sale may not even be affected. If a buyer cannot have their lawyer review the condo status certificate, they may be unaware of planned increases to condo fees or special assessments which can cost tens of thousands of dollars. The lack of basic offer conditions is putting homebuyers at significant personal risk and is pushing more people out of the market who do not have extra savings to cover any potential expensive issues.
Finally, if we look at other countries we can see that these issues we have discussed may not be as prevalent elsewhere. BMO Economics notes that despite Canada investing significantly more in residential real estate as a percentage of GDP than the United States, the cost of a house is 46% higher in Canada than the United States, after adjusting for purchasing power and exchange rates. Looking at G7 countries, Better Dwelling found that since 2005, Canada's real estate prices have more than doubled while Germany, the country with the second fastest growing prices, only saw prices increase by 38.5%.
In summary, the latest data and reports from 2016 and 2018 were already showing that a significant number of Canadians were in housing need. Home prices are now much higher (approximately +38% from 2016 average to January 2021), and job stability is much worse. Although down from the May 2020 peak of 13.7% unemployment rate, unemployment rose in both December 2020 and January 2021, going from 8.6% in November 2020 to 9.4%. It has become extremely difficult for young buyers to compete against investors and existing owners who have seen their home(s) appreciate massively in value. Not only is it difficult to match the bid, but buyers must also take on huge personal risk by submitting offers with no conditions. The affordability crisis does not only affect homeowner-hopefuls. Renters fared worse than homeowners in terms of waitlists, percentage of income spent on shelter costs, and core housing need per Statistics Canada’s report. When more and more hopeful buyers are priced out of the housing market, this will inevitably lead to a greater percentage of the population renting. With more demand for rental units, this means more competition amongst renters and therefore higher rent costs. This article discusses how this is already taking place and how there has been a rise in renovictions.
Growing wealth inequality and the housing market
“Owning a home key to capturing gains in net worth” was the defining statement from a Statistics Canada report looking at Q4-2020. With the value of residential real estate rising at the fastest pace since 2006 – households who owned their homes added $1 trillion to their net worth, while renters added less than $90 billion. This equates to $66,000 per owner household compared to less than $5,000 per renter household. For reference – this only slightly higher than the 2018 median pre-tax household income of $69,600. Renters who intend to remain renting are being punished for their lifestyle choice. Renters who are trying to save for a home must compete against those who already owned property and want to use their gains from the past year to add additional properties. This Statistics Canada report notes that while lower-income and younger households saw a stronger rebound in disposable income, this was only due to COVID-19 support measures introduced by the government. If the government had not introduced these support measures, the largest declines would have occurred for middle-income earners, lower-income earners, and young households. As this government support is only temporary, we can likely expect to see this flip back once terminated. Another Statistics Canada report looked at the trends in intergenerational income mobility and income inequality in Canada, where results showed that “mobility has steadily decreased over time and that there has been an increase in the inequality of the parental income distribution, as measured by the Gini coefficient”. This was observed for Canada and all of its provinces. The report states that there is at least a correlational relationship, if not causal, between inequality and income mobility. Income mobility refers to the correlation between parents’ income rank, and the income rank of their adult child. The Youth Outlook Study published by RBC found that young Canadians are feeling significantly less confident in their job prospects due to the long-term effects of COVID-19.
The statistics are clearly showing that owning property is creating huge amounts of wealth, lower-income and young households are struggling to grow their disposable income, and that an individual’s wealth is more tied to their parents’ wealth than ever. In our analysis, we looked at residential property gains and incomes from 2005 – 2020 and found that in some cities, a person could have created more wealth simply by owning a home than by earning the census median income. Even in other cities where this was not the case, the incremental wealth created from earning the census median income was fairly low on an annualized basis. We also discussed earlier how difficult it is to enter the housing market for lower-income and young people. One poll found that 35% of respondents had helped their adult children pay rent and 36% of parents are planning to help their kids under 18 years old do so in the future. This poll also found that 24% of respondents had helped their adult children buy a home and 48% with children under 18 years old plan to do so in the future. In short – owning property can create significant wealth but many do not have the opportunity to participate. A Statistics Canada study found that 39.7% of Canadians face a 50% chance of automation-related job transformation, with the 18-24 age group being the second most affected. There is an incredible amount of job uncertainty and many existing jobs are not paying well enough to allow Canadians to enter and remain in the housing market. Working and contributing to society is not being fairly rewarded relative to the passive wealth gained from owning property.
The threat to broader economic stability
Looking beyond one individual or family – what are the implications of this booming housing market for Canada's broader economic stability? Unemployment rates are worrying and the path to economic recovery from the COVID-19 recession is uncertain. Yet - we have new generations of home buyers taking on significant personal risk and committing to long-term debt while rates are at record lows. RBC noted in October 2020 that "11% of mortgage borrowers from large Canadian banks - representing around $175 billion of mortgage debt - are not making payments". With most borrowers locking in record low interest rates for only five years out of their typical 25 year mortgage, they could see their monthly mortgage payments get much bigger if rates rise. Many are noting that this would trigger massive mortgage defaults. Bloomberg reported that residential mortgage credit growth in 2020 was the highest since 2010 and was the first year where outstanding mortgage debt increased by more than $100 billion in a single year. This shows that there has been significant new borrowing since 2020, at record low rates which have propped up asset valuations and where offers with no conditions were widespread. While the government can influence interest rates through monetary policy, they cannot completely control them. Inflation leads to higher interest rates since lenders will require higher compensation for the money they are lending today and which will be returned in the future when the currency has purchasing power. With M2 growing at a record pace there is real concern about the possibility of rapid inflation. If inflation is growing too quickly and interest rates are kept low, there will be no reason for banks to continue lending. If interest rates are allowed to rise, we end up with massive mortgage defaults.
Better Dwelling analyzed Statistics Canada data and found that Canadian residential investment reached 9.43% of GDP in Q3-2020, up from 7.71% during the same quarter last year. They note that this Is the highest rate in the past 60 years and much higher than rates seen in the United States, which peaked at 6.7% in 2006 but is currently only at 4.3%. If people believe investing in real estate is a government-backed, guaranteed way to build wealth, why would they invest their money elsewhere? The Canadian Business Journal noted that Canadian innovation is on the decline, falling to 15th out of 144 countries and its lowest rank since 2006.
As noted earlier, a significant percentage of the population is spending more of their income on shelter costs than what is deemed affordable, and this is only expected to grow. Another consideration is how so many homes are now being sold with no conditions and the consequences of this are not yet known. With such an extreme sellers’ market and bidding wars, it is inherently a good time to sell a home that you know has expensive issues. How many buyers are losing their deposits due to financing complications or will be spending years paying to repair expensive issues the seller left behind while walking away with huge profits? How do we expect people to contribute to the economy if so much of their income is going to their landlord or bank? How do we expect people to start businesses if the cost of shelter is so high that they cannot afford to take the risk of losing stable income? Finally, consider those who despite all odds are still pushing to become homeowners. For many to even have a chance, they will need to save every penny. This means cooking more meals at home and spending less on travel and entertainment. This means buying cheaper goods and services and also doing so less frequently.
We cannot have a strong, stable economy when so much money is going towards shelter costs or being saved in hopes of being able to one day afford a property.
How we ended up in this crisis
This section first looks interest rates, discussing historical trends and the impact they have on home prices. We go through interest rate in detail and look at a number of examples to illustrate how significant their impact is. Then, we look at the activity in 2020 and early 2021 specifically as this period saw widespread price surges. Finally, we discuss other factors influencing home prices, including the lack of bidding transparency, the lack of publicly available data, and the supply issue.
Interest rates have a significant impact on home prices and the following example will demonstrate this. Before we begin, we are looking at data for the past fifteen years because CREA does not publish HPI data before 2005, and we were unable to find reliable discounted 5-year fixed mortgage rates prior to 2006. The national average home price in 2006 was approximately $305,000, and the approximate discounted 5-year fixed mortgage rate was 5.20% according to Ratehub.ca. If we assume an amortization period of 25 years, the monthly mortgage payment for the average home purchased in 2006 would have been $1,820. Below, we can see what the mortgage payments would be at different interest rates, if all other variables remain unchanged:
- 5.20% → $1,820 (approximate average rate for 2006)
- 3.00% → $1,450 (scenario analysis)
- 1.39% → $1,200 (rate as of December 2020)
When qualifying for a mortgage, a key factor in determining the amount you are eligible for is your ability to make monthly payments. As interest rates go lower, buyers can qualify for larger mortgages, which in turn drives home prices up. Below, we can see what mortgage amounts for different interest rates would result in the same 2006 monthly payment of $1,820:
- 5.20% (approximate average rate for 2006) → $305,000 mortgage results in monthly payment of $1,820
- 3.00% (scenario analysis) → $384,000 mortgage results in monthly payment of $1,820
- 1.39% (rate as of December 2020) → $461,000 mortgage results in monthly payment of $1,820
To reiterate the point above – a home purchased in 2006 for $305,000 would have approximately the same monthly mortgage payment as a home purchased in 2020 for $461,000. Who benefits from lower interest rates? If we look even further back in time, we can see that interest rates have been on a downward trend for 40 years, after reaching a peak in 1981 of over 20%. Many who bought homes in the past 40 years have seen their mortgage payments continually shrink as they were able to renew at lower rates.
Declining interest rates over the past 40 years have been driving up home prices, but now interest rates are close to 0%. At best, new homeowners will just not get the same benefit from lowering rates as past homeowners. In the worst case, new homeowners will pay for homes priced based on low rates but end up seeing higher rates before their mortgages are paid off. Below, we look at what the mortgage payments would be if interest rates increased on a home purchased in December 2020 for $655,000:
- 1.39% → $2,590 (December 2020 rate)
- 3.00% → $3,110 (scenario analysis if rates rise to 3.00%)
- 4.79% → $3,750 (rate used for stress test)
Some argue that due to growing global indebtedness we may not see rates go much higher for a long time, but it is not out of the realms of possibility. In conclusion, the past 40 years of interest rates have been key driver of home price growth. However, with rates now near zero and home price gains offsetting the benefit of lower rates, there is not much more room for new home buyers to see the same benefits others had in the past. In part, home prices have not increased due to higher value but rather due to buyers’ ability to afford a higher mortgage for the same monthly payment. Of course, falling interest rates do not fully explain the gain in home prices, and those other factors will be discussed next.
Next, we need to look at 2020 to January 2021. As a result of COVID-19, there was low immigration, high unemployment, and high economic uncertainty. All else the same, it would have been reasonable to expect low or negative change in home prices. CMHC forecasted that the average MLS price would decline by 9% to 18% from its pre-COVID-19 level in this 2020 Housing Market Outlook. So what happened? There have been widespread surges in home prices. Only 2 out of the 37 regions across the country that CREA reports on saw year-over-year gains less than 5%. 25 out of the 37 regions saw year-over-year gains over 20%. We built this tool that lets you look at historical home prices for any region tracked by CREA. Below we discuss what caused these surges.
Due to the impacts of COVID-19, policymakers were concerned about slowing economic growth and the possibility of companies being unable to pay their debt and people being unable to pay their mortgages. If mortgages and company debt become delinquent in high numbers, this could lead to an economic depression. Lenders would not be able to recover the money they have lent and would not want to lend out further money if there is significant risk that they won’t get that money back. To avoid this, policymakers decided to implemented measures to try to stimulate the economy. The first thing they did was to lower interest rates, as credit is a key driver of economic growth and allows borrowers to spend more money today that they would have otherwise not been able to spend. Since the cost to borrow declined, this promoted higher borrowing from businesses and from individuals through residential mortgages. However, this brought interest rates down to almost zero and led to the Bank of Canada (BoC) implementing a quantitative easing program in April 2020, the first time in the country’s history. Quantitative easing refers to the purchasing of large amounts of Government of Canada bonds from commercial banks. This began at $5 billion per week and was subsequently reduced to $4 billion per week (unchanged as of the time of publication). One effect this program has is lowering long-term interest rates including mortgages and business loans. The discounted 5-year mortgage rate dropped from approximately 2.14% in March 2020 to 1.39% as of December 2020. Another effect this program has is providing excess liquidity to commercial banks, allowing them to lend more freely. This has led to mortgage debt rising at the fastest pace in a decade. Another consideration relating to quantitative easing is that it is increases the amount of money in circulation, causing some be concerned about potential inflation. If inflation does materialize, this means cash becomes less valuable. Inflation concerns can lead to increased investments in assets such as real estate, with the goal of protecting wealth.
In short – policymakers have supported higher home prices through lowering interest rates and the introduction of quantitative easing, which has provided excess liquidity to the market. This liquidity has gone into various assets, including real estate, and driven prices upwards. This is not a conspiracy theory and is clearly spelled out on the websites for many central banks. If we look at the Bank of England website, they state that “QE can stimulate the economy by boosting a wide range of financial asset prices”. They continue to say that QE makes businesses and households wealthier and therefore more likely to spend more and boost economic activity. Next, we look at other factors that grew the impact of these to an even bigger magnitude.
First, there is no transparency in the existing bidding process. A buyer is told how many other bids there are but not what the other bids are. In a seller’s market where there can be 10+ bids on a single home, each party that wants a chance at having their offer accepted must bid far above the asking price. With many people feeling like they will never have a chance to buy a home in the future if they don’t do so now, they are willing to pay the extra dollar. This then becomes the next comparable for that neighbourhood where the same scenario will happen again – creating a snowball effect.
Second, there is a lack of current and historical data, which is detailed, up-to-date, accessible, and free. Statistics Canada does not provide much housing data, while CREA and CMHC provide certain summarized data to the public. Obtaining more granular data from these parties is expensive, and not something that the average person can afford to spend money on. Regional real estate boards hold the most granular and up-to-date data, which they are very protective of and which they only provide to members (realtors). The Toronto Regional Real Estate Board (TRREB) has a history of aggressively guarding their data, such as when they instructed member brokerages to stop showing data more than two years old. Public access to this data is important as it allows all parties to make more informed decisions and allows for more consistent monitoring of the housing market in relation to other economic and demographic metrics. There is another data-transparency issue in regard to the parties that are purchasing properties. There is no clear up-to-date and detailed data that shows the make-up of home buyers. Home buyers could be any mix of locals buying a place to live, individual investors, corporate investors, foreign investors, etc. There is no way to implement effective policy changes that help locals buying a place to live, if there is no public data on who they are competing against.
Finally, there is the supply issue. At the end of January 2021, national supply was at the lowest levels on record. This issue various by region but where it is present – adds to the intensity of sellers’ markets and bidding wars.
Existing initiatives and why they are not sufficient
This section discusses two existing initiatives which are intended to improve housing affordability. First, we look at the National Housing Strategy and CMHC’s plan for everyone in Canada to have a home that they can afford and that meets their needs by 2030. Second, we look at the First-Time Home Buyer Initiative that was launched in September 2019.
CMHC has laid out its own performance measures and is leading NHS (National Housing Strategy) activities focused on creating new housing units and repairing/modernizing existing social housing. The NHS is a 10-year, $55+ billion plan designed to remove 530,000 families from housing need (living in homes that are inadequate or unaffordable).
The initiatives in CMHC's plan and the NHS are critical and there is no doubt that it will greatly help many Canadians. Programs targeting the most vulnerable will help us progress towards more inclusive communities with stronger economies. However, the NHS notes there are currently 1.7 million Canadians in housing need and the NHS goal is to assist 530,000 families. CMHC's plan appears to also be focused on those who are currently most vulnerable. If Canadian housing and labour markets were stable - perhaps this goal would be sufficient. The unfortunate reality is that housing affordability has been consistently worsening in many communities. There are many factors that suggest the population of vulnerable Canadians will face significant growth in the coming decade, which neither of CMHC or the NHS have sufficiently addressed. While there are many drivers, these may be the most significant:
- Rising home prices compared to relatively stagnant wages is putting home ownership out of reach for more and more Canadians.
- The full economic impacts of the COVID-19 recession are still unclear at this point, but we know that it has brought financial hardship to many Canadians and many businesses have permanently closed.
- The results of a Statistics Canada study suggests that 10.6% of Canadian workers are at high risk (probability of 70% or higher) and 29.1% are at moderate risk (probability between 50% and 70%) of automation-related job transformation. While it will impact certain groups more than others, automation will impact many Canadians of various ages, occupations, industries, educations, and income levels. The 55 or older age group is expected to be hit the hardest, at which point it is often difficult to retrain or re-educate. The 18 to 24 age group is expected to be the second most impacted, who will also not have any home equity at that stage in their lives.
CMHC's plan and the NHS do include a variety of measures that will benefit many Canadians but it is does not seem to plan for possibility of the number of Canadians in housing need growing fast than ever.
The First-Time Home Buyer Initiative is a program launched in September 2019 where a buyer can receive an interest free loan from the government, for between 5 – 10% of the cost of a home. However, certain rules have limited the effectiveness of this program. When it first started, it could only be approved for homes costing up to around $505,000. In areas with the biggest affordability issues, there are not many homes available for that price. In December 2020, the rules changed so that FTHBs in Toronto, Victoria, and Vancouver could qualify for homes costing up to around $722,000. However, the January 2021 benchmark home prices were $1.057M, $0.928M, and $0.743M in Greater Vancouver, Greater Toronto, and Victoria, respectively. Many other cities are also seeing very low supply below the maximum allowable home price. In the first year of the program, only 9,500 applications were received. Of these, only 743 applications were approved in Ontario and 327 in British Columbia – the two provinces facing the worst affordability problems.
A note to current homeowners
This section is intended for homeowners who are unsure if they should sign this petition. To begin – there is no valid reason for anyone to have ill will towards existing homeowners. And even though landlords get a lot of flak, we need rental units because many people prefer the renting lifestyle and either want or need the flexibility to easily relocate. You should not have any guilt for owning property.
The problem is not that homes are becoming more expensive – it is that they are appreciating at a pace that people can no longer keep up with, despite doing everything right in life. Wealth created from working and contributing to society is being outpaced by wealth created from owning property. Two people who do all the same things in life, except where one is an owner and the other is a renter, are ending up with vastly different wealth.
While prices are surging, what benefit are you seeing unless you sell your home? Even if you sell, you will still need to buy another expensive home, relocate somewhere cheaper (these days this could be quite the distance), or rent. Meanwhile, life is becoming more and more difficult for those who do not own property. Are you fine with your friends, kids, grandkids, and neighbours, leaving – either to other cities or even countries? After all, if there are other places where they have the opportunities to see their work payoff, why wouldn’t they at least be looking? As well, all of these people who are being shut-out of home ownership and facing rising rent costs will still need some place to live. Canada’s national housing strategy costing over $55 billion is designed to help the 530,000 families in housing need as of 2017. How much more spending will be needed when even the highest paid young workers cannot afford to buy a home and the rent-space becomes more crowded and competitive? The money to fund those projects will either come from higher taxes or new money causing rising inflation. Don’t even think about arguing against building more affordable housing if you won’t support price stability.
While it can be nice to see the value of your home surge, consider the rewards you are receiving compared to the pain being inflicted on lower-income earners, young people, and future generations. There is currently a very bleak outlook for housing affordability and these people need greater home price stability. So the question to ask yourselves is – are the double-digit gains worth it?
Where we can go from here
If the trends we have been seeing continue, there are really only two options as to what happens next. Option 1 is unimaginable wealth inequality, where an individual’s success depends almost entirely on their parents and wealth is concentrated in a very small percentage of the population. Option 2 is an ever-growing bubble that through government intervention or economic collapse eventually pops and creates some opportunity for the have-nots. The bigger the bubble gets the bigger that pop will be, and the economic consequences of such a pop would likely hurt both the haves and the have-nots. Both of these options are devastating. The best way forward is price stability and reattaching home prices to income levels. Income growth rates are unlikely to see meaningful change, so the only way to prevent these from happening is to act quickly to curb the trends and bring real stability to home prices. This means no more 30%, 10% or even 5% annual growth. This means consistent monitoring of home price growth against income growth, on a national and regional level, where a target rate would be 1-3% based on historical income trends. The Bank of Canada’s mandate targets a 2% inflation rate but does not consider home prices and concerns have been raised regarding the methodology of accounting for shelter costs in the Consumer Price Index (CPI). The Bank of Canada implements measures to ensure their inflation target is achieved. CMHC, whose mandate is to make housing affordable for everyone in Canada, does not publicly set a target home price growth rate, nor does it have the tools to influence this on their own. There are a number of measures that policymakers could implement (some very quickly), including the introduction of home price growth targets, making data more accessible, applying stricter rules to investor buying, opening a national review of zoning laws that are causing supply issues, creating open bidding systems, reconsidering the term and magnitude of the quantitative easing program, and making certain offer conditions mandatory. While declining interest rates have driven up real estate prices, there are much broader implications of raising interest rates which likely make it an unrealistic solution. If this petition is successful in raising awareness and causing more policymakers to be vocal about the issue, the next step is to work on bringing immediate change before we are even further down the path of option 1 or option 2.
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