Alleviating Canada’s housing affordability crisis requires addressing the issue of housing supply. However, Ontario faces various challenges such as rising interest rates, labor shortages, high input costs, and inter-provincial migration from larger cities. Analysts suggest that solutions range from providing incentives to developers and builders to rethinking land-use policies.
Ontario has set a goal of building 1.5 million new homes by 2031, but many observers believe this target is unattainable. Benjamin Tal, CIBC’s deputy chief economist, emphasizes the need to maximize what can be done to address the affordability crisis. He advocates for providing further incentives to developers, such as eliminating the HST or reducing development charges. Tal also suggests selling developers land at a reduced price if the project is focused on purpose-built rentals. He believes that developers play a crucial role in solving the affordability crisis.
Wendell Cox, an urban policy expert, focuses on public policies that have distorted the housing market by driving up land prices. He points out that policies like urban containment have contributed to higher house prices relative to incomes. Cox argues that the only viable incentive is finding a way to build on inexpensive land, although he does not advocate for subsidies.
The housing affordability crisis in Ontario is also impacting businesses. The Ontario Chamber of Commerce (OCC) states that the rising cost of housing is making it difficult for businesses to attract and retain talent. The OCC recommends improving the labor pool for housing construction, emphasizing purpose-built rentals, accelerating the development cycle, and making regulatory improvements.
The Canadian Home Builders’ Association (CHBA) highlights the impact of rising interest rates on housing construction and suggests policy changes to support increased construction. The CHBA proposes measures like bringing back the 30-year amortization for insured mortgages for qualified first-time buyers. However, Benjamin Tal warns against encouraging demand while trying to solve the affordability crisis.
The CHBA also raises concerns about rising municipal development taxes and government-imposed costs, which contribute to the high cost of housing. RBC’s analysis emphasizes the need for fees to be consistent with the goal of improving housing affordability.
The construction industry in Canada is facing severe labor shortages, which are further exacerbating the housing affordability crisis. The residential construction price index has increased significantly, and RBC warns that focusing on higher-density development could strain production capacity limits.
As housing activity increases and interest rates rise, housing affordability is projected to worsen. RBC’s assistant chief economist predicts a decline in the national affordability measure over the coming year. Toronto’s affordability measure is already in crisis territory.
Benjamin Tal suggests that Canadians should adopt a mentality similar to those in Manhattan or Europe, where renting is seen as a normal part of the culture. However, Wendell Cox believes that the “Canadian dream” of homeownership should still be possible and argues that government policies are creating poverty and inequality by restricting the housing market.
In conclusion, addressing Canada’s housing affordability crisis requires a comprehensive approach that includes increasing housing supply, providing incentives to developers, rethinking land-use policies, and addressing labor shortages and rising costs.