That noise you hear is the sound of progressives panicking over Pierre Poilievre. It was all on Twitter this week, in the wake of the Conservative leadership candidate’s campaign. latest video production, in which he rants at length about the high cost of housing. Say what you will about him, Liberal Twitter told himself nervously, but he’s onto something.
Is he? You would think so, judging by the federal budget, which was plagued by measures aimed at the high cost of housing: a ban on non-resident foreign buyers; a new tax-free First Time Home Savings Account; a doubling of the first-time homebuyer tax credit; a tax on “property exchangers”, that is, those who sell a house within 12 months of purchasing it; all backed by a promise to somehow double the number of homes built over the next decade.
Whether any of these are likely to have much of an effect on prices is another question. Foreign buyers, beloved scapegoats though they are, are a small part of the overall problem, as recent years should have taught us. The BC and Ontario governments imposed heavy taxes on non-resident buyers. pink prices even faster than before
The effect of the new savings accounts is equally debatable (the $40,000 that can be saved within them is not enough for a down payment in most Canadian cities). No one seems to have much idea how the government is proposing to double construction, it seems to be more than one aspiration anything else.
If that sounds too cynical, it is due to long experience. Governments have been unveiling program after program to control house prices for years, with little visible effect.
Possibly this is not entirely accidental. It tends to be forgotten in most reports on the subject, but high and rising house prices have far more beneficiaries than victims: two-thirds of Canadian households who own their own home, versus the fraction of the rest who would rather own than rent.
If you think rising prices are a hot political issue, just wait until mortgage rates go up, prices start to fall, and over-leveraged homeowners find themselves underwater. So for the incumbent politician, the sweet spot is to do something to lower house prices, without actually lowering them.
This is not necessarily irrational. Prices may have gotten frothy in the last couple of years, but the social impact of high house prices has generally been greatly exaggerated. Millennials, in particular, are not the generational victims they have been presented with, as a 2019 study (Economic Welfare Among Generations of Young Canadians: Are Millennials Better or Worse?) by two Statistics Canada economists makes clear.
They found that millennials, the generation now in their 30s, had a median income one-third higher and a median net worth two-thirds higher (both in inflation-adjusted dollars) than Gen Xers their age, who they were better in turn. than the Baby Boomers.
Millennials have undoubtedly taken on higher levels of debt than previous generations, but why shouldn’t they? They are paying a fraction of the interest rates their parents paid. Overall, millennials are just as likely to own their own home (51 percent) as members of Generation X their age, and only slightly less (55 percent) than Baby Boomers.
But it’s okay. Suppose governments wanted to reduce house prices, instead of just talking about it. How would they do it? One way is to reduce demand for housing: that’s coming, with interest rates poised to rise. The flipper tax offers another intriguing possibility: With the precedent of taxing capital gains on primary residences established, the way is open to lengthen the minimum holding period.
But the most promising route, as all housing experts will tell you, is to increase supply. In fact, there is something in common here between the government and Mr. Poilievre. The latter promises to be tough on municipalities that tie up development with red tape: “If they want more federal money, these big-city politicians will have to approve more housing construction.”
That, stripped of the rhetoric, more or less appears to be the goal of the budget’s New Housing Accelerator Fund, which is to “incentivize” cities to build more housing, including “seed funding for investments in housing planning and delivery.” municipal”. processes.”
But what does this really mean? It’s one thing to tell cities to approve more housing construction, but where? When so much urban land is reserved exclusively for single-family homes, the possibilities are limited.
Here’s one way, then, to differentiate the contenders from the pretenders on this issue: Are they willing to push the municipalities to allow more multi-unit housing to be built in these neighborhoods? Otherwise, it’s all talk.
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