Juno News - Reality Check： Why is housing unaffordable？ Too much government

00:00:00.000 I'm Jasmine Moulton and it's time for Reality Check.

00:00:10.560 Reality Check is a new True North podcast that uses facts and logic to debunk the favorite

00:00:15.300 arguments of the left. Here's how today's show will roll out. We'll play clips of the leftists

00:00:19.540 making these arguments, then we'll equip you with the facts that you need to debunk these arguments

00:00:23.680 when you hear them in common conversation. At the end, we'll give a quick recap. Today,

00:00:28.240 we'll be discussing the housing affordability crisis in Canada. But before we get into the

00:00:32.440 leftist clips on this issue, let's just do a brief overview of the housing affordability crisis in

00:00:37.460 Canada, just so we're all on the same page. When I'm talking about housing affordability,

00:00:41.300 I'm using the Canadian Mortgage and Housing Corporation, CMHC's definition, which is this.

00:00:47.300 A house is considered affordable when it costs 30% or less than a household's pre-tax income.

00:00:53.380 Those costs include your mortgage, your interest payments, and any sort of bills associated with

00:00:57.900 the house. Now here's where we get into trouble. RBC Economics released a housing report in June

00:01:02.860 and its aggregate affordability measure for Canada surged to 54% in the first quarter of 2022

00:01:09.440 and they called that the worst level of affordability since the 1990s. The report also notes that,

00:01:16.480 quote, the Bank of Canada's forceful interest rate hiking campaign will further inflate ownership

00:01:22.020 costs in the near term, putting RBC's national affordability measure on a path to worst ever

00:01:28.020 levels. The report found that Vancouver and Toronto are the worst housing markets for affordability in

00:01:33.600 Canada. The report noted that housing affordability in Vancouver is now at 111% for a single detached

00:01:41.300 home, meaning the median pre-tax income per household in Vancouver isn't even enough to cover the cost of

00:01:47.300 housing. Perhaps even more alarming, the report found that a one percentage point rate increase in

00:01:52.820 interest rates raises mortgage payments by more than $600 per month in Vancouver and 554 in Toronto.

00:02:01.860 The report went on to note, in March, the Bank of Canada initiated a hiking cycle that we expect

00:02:07.620 will culminate in a 250 basis point increase in its policy rate by the fall. As of June, half of that

00:02:14.620 is still to come. Overall, the RBC economics report emphasized that Canadians are facing the worst

00:02:20.780 housing affordability crisis in a generation. While everybody in Canada agrees that housing

00:02:25.340 affordability is an issue, not everybody agrees on the solution. Take a listen.

00:02:30.300 One of the initiatives we're working on, $4 billion towards municipalities in order to double the

00:02:36.060 construction of new housing over the coming years. This is something that is going to help,

00:02:41.500 whether it's enough or directly going to be helping your son. We'll have to see because there's not

00:02:47.660 just one program that's going to help anyone. There's going to be a range of programs from

00:02:52.060 programs of renting to own that we've launched as well in this budget, from programs that are helping

00:02:58.380 the first-time home buyers with increased incentives and reduction in their mortgage costs, initiatives to

00:03:06.380 build greater density, particularly around public transit that are going to allow people to get

00:03:11.340 into the housing market with their first starter condo, starter home. These are the kinds of things

00:03:17.100 that get people's toes in the door. We know that young people need to be able to

00:03:24.700 build the stable base with which they want to start a family, give their future kids the kinds of

00:03:30.300 opportunities that their parents worked hard to give them. And that's what this budget and this focus

00:03:36.540 of the government is on right now. But it's not going to be easy. It's going to take a number of years

00:03:42.220 and anyone who's promising that they have a quick fix for it is not being straight with Canadians.

00:03:47.740 It's going to take all of us working together to curb foreign speculation, to make sure that market is

00:03:53.420 fairer, to create more housing units and offer and to support families being able to save up to do that.

00:04:00.060 And that's very much what we're focused on. For our audio only listeners, that was Prime Minister

00:04:04.780 Justin Trudeau. He was listing off his government solutions to fix this housing affordability issue

00:04:10.380 in Canada. Now, I heard a lot of big government approach, more spending, more taxes, more regulation,

00:04:17.020 etc. But to give credit where credit's due, there were some elements like a tax-free saving account

00:04:22.140 for first-time home buyers that were not big government solutions. But overall, it's clear

00:04:26.780 that the Liberal government's approach to fix this housing affordability crisis in Canada is more

00:04:32.220 government. When it comes to Canada's housing affordability issue, leftists will always say

00:04:36.380 that more government is a solution, more government regulation, more government spending or social

00:04:40.620 programs, more taxes. But the reality is, too much government is the reason there's a housing

00:04:46.620 affordability crisis in this country. As with any market, Canada's housing market relies on the

00:04:51.660 basic economic principles of supply and demand. Supply is not kept up with the increases in demand,

00:04:57.820 hence the upward price pressure on housing in Canada. But governments in Canada at all three

00:05:02.540 levels, municipal, provincial, and federal, exacerbate this issue in three main ways.

00:05:07.580 One, they restrict the supply of housing. Two, they increase the demand for housing. And three,

00:05:11.820 they add taxes and fees that make housing more expensive. So let's start off with the first way

00:05:15.900 that governments make housing in Canada more expensive, by restricting supply. Governments,

00:05:19.900 specifically at the municipal and provincial level, could speed up the supply of new housing if they

00:05:24.780 acted promptly and reasonably on zoning matters. Unfortunately, that's too often not the case.

00:05:30.620 In my home province of Ontario, for example, there's upwards of a seven-year waiting list by the time

00:05:36.460 developers purchase a plot of land to the time they can even get shovels in the ground. Seven or more

00:05:41.420 years! Imagine purchasing a piece of land and having to pay the taxes on it and just hold that capital

00:05:46.300 in the land for close to a decade. Of course, housing is going to be expensive when it's that

00:05:51.020 capital intensive. And during that time, the cost of labour and housing materials all goes up. It is

00:05:56.460 simply unacceptable that municipal and provincial governments are so incompetent that it takes close

00:06:01.500 to a decade to start building new homes in this province. Hundreds of thousands of new homes are being

00:06:06.380 held up because of this across the province. And Ontario's former Liberal Premier Kathleen Wynne does

00:06:11.980 not deserve credit on this front because she and her government actually dismantled the Ontario 0.99

00:06:16.780 Municipal Board, which was in charge of speeding up the approvals process. Now instead, many of these

00:06:23.180 zoning and appeals processes go back to big city councils that are bureaucratic and not quick at all

00:06:29.420 in their approvals process. Zoning and regulatory issues really do lie at the heart of this supply issue

00:06:34.460 in the housing affordability crisis in Canada. Big city councils are debating every minor issue and

00:06:39.340 they're also subjected to various requests and demands from these NIMBY or not in my backyard 0.99

00:06:45.340 special interest groups and all of this compounds to delay and delay and delay new home builds. If you

00:06:51.580 consider for example the city of Toronto, it's less than half as dense as the city of New York. But if we

00:06:57.900 switch from buying homes to looking at renting, governments also impose delays on the supply of new

00:07:04.060 rental units as well. One main way that they deter investment into purpose-built rentals is by

00:07:09.980 threatening policies such as rent control. Take a listen. That's why today I am so delighted to be

00:07:15.820 standing here in Scarborough Agent Court with Sue and Manal and Mitzi to announce that an Ontario

00:07:20.860 Liberal government would reinstate rent control all across this province on every property on every building.

00:07:27.580 We know again that right here in Scarborough and elsewhere that rents continue to go up because of

00:07:37.260 the inaction, because Doug Ford has chosen to side with the speculators instead of with tenants and

00:07:43.660 everyday hard-working families. In addition to bringing back real rent control across the board,

00:07:49.020 Ontario Liberals will also make sure that more resources are provided to help deal with enforcement

00:07:55.340 for bad actors in this industry. We'll bring forward more resources to clear the backlog in terms of

00:08:01.020 landlord and tenant relations and the back and forth that occurs there. And we're going to help to

00:08:06.380 provide a sensible and responsible legal framework for tenants and for owners who want to engage in a

00:08:13.580 rent-to-own framework going forward. Now for our audio-only listeners, that was Stephen Del Duca. He was the

00:08:19.420 former Liberal leader in Ontario in provincial politics and he's talking there about rent control.

00:08:25.020 Economist Asar Lindbeck described rent control as the most efficient technique presently known to

00:08:30.620 destroy a city, except for bombing, and Lindbeck could not be more accurate. It's a well-known fact 0.99

00:08:35.980 that rent control discourages investment into purpose-built rentals. The reason for this is

00:08:40.700 obvious. If you were an investor looking to get a return on your investment, why would you ever park your

00:08:46.700 money where the government's going to regulate the amount of profit that you can make and in some cases

00:08:51.580 limit it altogether? The issue of rent control really does deserve its own dedicated podcast

00:08:56.860 because it's something that the left returns to. They go back and back after every election. It seems

00:09:01.100 to come into fashion, but it really is a terrible idea that has been proven to be ineffective time and

00:09:06.780 time again. This kind of harmful rhetoric from our political leaders such as Stephen Del Duca can have

00:09:11.660 a lasting impact sending shockwaves through the investment industry. So instead of scaring investors away from

00:09:17.180 the prospect of purpose-built rentals, governments could do a lot to instead incentivize them. For example,

00:09:22.940 if they reduce development charges and taxes on purpose-built rentals, I'm sure that would catch a lot of

00:09:27.820 investors' attention. And as we've already mentioned, increasing supply tends to have a downward price

00:09:32.060 pressure on rental unit costs. As RBC Economics noted, when rental vacancy rates go below 3% in a city,

00:09:40.220 that's when the cost of rent starts to go up. As a quick recap, governments in Canada restrict the

00:09:45.180 supply of housing in three ways. One, through a lengthy zoning process and regulatory delays.

00:09:50.540 Two, through large city councils that are susceptible to NIMBY special interests. And

00:09:55.180 three, by threatening policy changes such as rent control that deter development.

00:10:00.460 All right, let's move on to the next way that the government exacerbates the housing affordability

00:10:04.860 crisis in Canada, and that is by increasing demand. Canada's population is rapidly growing.

00:10:10.780 It's growing the fastest in the G7, and it's growing at twice the rate that the US population is growing.

00:10:16.220 According to data from the Smart Prosperity Institute, since 2016, after Trudeau came to power

00:10:21.500 and started boosting immigration, the province of Ontario has seen 414,000 new households formed,

00:10:28.380 but built only 349,000 new homes for them. Now, it doesn't take a rocket scientist to figure out that

00:10:34.700 if you're increasing the number of people who need a home, the demand for home goes up, but you're not

00:10:39.740 increasing the supply at the same rate, clearly demand has outstripped supply and you're going to

00:10:44.540 have upward price pressure. But to be clear for all those listening to the show, this is not an

00:10:49.100 argument against immigration, but it is an argument against irresponsible government policies that ignore

00:10:54.540 the supply side of the housing issue and exacerbate it by increasing the demand. Now, let's get to the

00:10:59.820 third way that governments at all levels across the country increase the cost of housing, therefore

00:11:04.780 exacerbating the affordability crisis, and that is through taxes and fees. Now, every single politician

00:11:11.260 in Canada at every single level of government talks about the housing affordability crisis. They talk

00:11:17.500 about how terrible it is, how sad it is that children, the next generation can't afford to buy homes,

00:11:24.380 especially in the neighbourhoods where they grew up. But at the same time, these same politicians are

00:11:29.100 charging outrageous fees and taxes on homes in their communities. For example, the Building Industry

00:11:35.980 and Land Association found that some development charges in the GTA, the Greater Toronto Area, had

00:11:41.340 increased by up to 878% since 2004. That adds a cost of $164,000 per condo unit in Toronto. If municipal

00:11:53.260 politicians were actually concerned about housing affordability in their jurisdictions, they'd have a lot

00:11:57.980 of tools at their disposal, they could reduce development charges, they could reduce property taxes,

00:12:03.340 but you don't see that happening anywhere. And there's good reason for that. The housing industry really

00:12:07.980 is politicians own personal ATM. And these taxes and fees are no small sum. Consider property taxes in the

00:12:15.100 biggest city in the province that I live in, for example, Toronto. The average selling price for a single

00:12:19.820 detached home in Toronto right now is around $1.6 million. If you look at the property tax rate in Toronto,

00:12:26.860 on that average single detached home price, you'd be paying over $10,000 a year in property taxes.

00:12:33.420 That's a lot of money. And Toronto is the only city in Ontario that charges double land transfer tax. So

00:12:39.900 if you move anywhere else in Ontario, you'd pay land transfer tax once to the province, but Toronto

00:12:45.180 arbitrarily has doubled that amount. So for example, if we consider this $1.6 million single detached

00:12:51.420 average home sale price in Toronto, the amount of land transfer tax that you'd pay adds up quick.

00:12:56.620 You'd pay about $28,500 to the province, you'd pay about $28,500 to the city, and quickly that adds up

00:13:04.220 to $57,000. It should be clear to everybody listening that by now, governments are a lot more concerned

00:13:10.540 about their own revenues than they are about housing affordability. But politicians love to distract from

00:13:15.020 this fact by scapegoating foreign buyers. So let's take an honest look at this claim that foreign buyers

00:13:21.100 are the culprits behind the Canadian housing affordability crisis. Consider this. Ontario's

00:13:26.460 non-resident speculation tax collected a meager 156 payments in Toronto in the first quarter of 2019,

00:13:33.500 while the city expects to grow by 41,000 people per year. So it becomes evident quite quickly that

00:13:39.820 at best foreign buyers are a drop in the bucket. They are not a significant driver of prices in the

00:13:46.620 Canadian housing market. If they were, the two hottest housing markets in the country,

00:13:51.260 both Vancouver and Toronto, would have cooled after both places respectively introduced their own foreign 0.99

00:13:56.300 buyers tax. What happened instead was that both markets kind of paused, figured out what sort of

00:14:02.860 impact that would have, and then they carried on as per usual. These taxes have not had an impact

00:14:07.900 because foreign buyers are not truly the main cause or the main culprit or even a significant one

00:14:13.820 behind the cost of housing in Canada. The Canadian government doesn't even track the total number

00:14:18.380 of foreign buyers. So it's odd to hear all of these federal politicians across the political spectrum

00:14:24.060 scapegoating foreign buyers as the problem behind the Canadian housing market affordability crisis,

00:14:29.580 because they don't even know how many there are. Nobody does. We're not tracking it. But let's just

00:14:33.900 pretend for a moment that there are even a handful of these foreign buyers in the Vancouver and Toronto

00:14:39.740 markets. As we saw in Toronto, the amount of property tax that you would pay on the average single detached

00:14:46.860 home is over $10,000 a year. So if it is the case that there's a foreign buyer who has purchased a unit

00:14:53.340 or a home, left it vacant, they're still paying property taxes on that property, but they're not consuming

00:14:59.180 any of the services. So if anything, they're contributing $10,000 in taxes without draining

00:15:04.940 the system. My point is that this foreign buyer issue is marginal at best, very much overblown by

00:15:11.180 politicians who are looking to cover their own tracks and culpability in the housing affordability

00:15:15.500 crisis. Ultimately, it wouldn't matter if foreign buyers were buying these units if there wasn't a

00:15:20.700 shortage of supply. And as we've already pointed out, it's the government's fault that they're suffocating

00:15:25.580 supply in this country. Next up, let's talk affordable housing. Leftist politicians are 1.00

00:15:30.220 obsessed with affordable housing as a solution to Canada's unaffordable housing market. Take a listen.

00:15:36.220 It hasn't been treated like the crisis it is. So what we're proposing is some concrete steps.

00:15:41.580 Let's massively invest in housing as a way to create jobs locally in communities and as a way to ensure

00:15:48.700 people have a place to call home. We want to see people have a place they can buy. We want to make

00:15:53.980 sure that there's affordable rental. And so what we're proposing is investing massively to create

00:15:58.300 half a million new homes, investing in cooperatives, in not-for-profits, building apartments, building

00:16:03.740 townhouses, building houses. We want to build massively as a way to recover out of this pandemic

00:16:09.660 and a way to build forward for the future. For our audio-only listeners, that was federal NDP leader

00:16:14.780 Jagmeet Singh talking about affordable housing in Canada. But he's not the only one who thinks that

00:16:19.980 this is a solution to the housing affordability crisis. Under Prime Minister Justin Trudeau,

00:16:24.300 the Liberal plan also includes spending, and I quote, $2.7 billion over four years to build and

00:16:30.540 preserve more affordable housing. But the problem is the government doesn't have money to pay for this.

00:16:36.220 Either we're going to have to increase current taxes, or we're going to have to add this onto the

00:16:41.500 national credit card and ask taxpayers to pick up the tab plus interest down the line. Obviously,

00:16:47.020 either of these scenarios would exacerbate affordability in Canada. And just as a reminder,

00:16:51.340 adding a tab to our future credit card bill really is not a good idea because Justin Trudeau has been

00:16:56.540 doing that since the moment he got into office. He's already doubled the debt, the country's national

00:17:01.180 debt has already surpassed $1 trillion, and he adds over $144 million to the debt every single day.

00:17:09.020 So remember at the beginning of the podcast when we read that clip from RBC Economics that said

00:17:14.220 inflation is spurring a rate hike that should worry everybody? Yeah, Justin Trudeau's spending

00:17:19.020 has a lot to do with that. What causes inflation? Government spending. In a nutshell, inflation went

00:17:23.980 through the roof following COVID because during COVID, Prime Minister Justin Trudeau's government spent

00:17:29.180 well beyond its means historic levels of spending. Long story short, the Bank of Canada facilitated that

00:17:34.620 spending spree by printing money. When there's more money in circulation without the economic growth to

00:17:39.260 justify it, that's when inflation occurs. Now the main way that the Bank of Canada can curb

00:17:43.740 inflation is through raising interest rates. And while this tool may be good at curbing inflation,

00:17:47.980 it has other downsides as well. Obviously it will add fuel to the fire of the affordability crisis

00:17:52.860 in Canada's housing market. And as you'll recall from the beginning of the show, RBC Economics stated that

00:17:58.140 a one percentage point rate increase raises mortgage payments by more than $600 per month in Vancouver

00:18:04.700 and $554 per month in Toronto. So while the federal government loves to say that they really are

00:18:11.020 invested in this housing affordability crisis and they really care, clearly you have them to thank

00:18:16.540 for your increased mortgage interest payment every month. So let's do a quick recap. Leftists love to 0.94

00:18:21.500 say that more government spending and more government programs are required in order to combat the

00:18:26.220 increasing affordability crisis in Canada's housing market. This is obviously false and here's how you

00:18:31.020 counter that argument. Number one, identify that government at all levels in Canada, municipal, provincial,

00:18:35.980 and federal. Government is the reason that housing is unaffordable in this country. And number two,

00:18:40.460 explain that government drives up the cost of housing in three ways. One, by suffocating supply,

00:18:44.860 two, by exacerbating demand, and three, by imposing hefty taxes and charges on new developments.

00:18:50.060 So here's a reality check. Canadian politicians are trying to distract from their own role in the

00:18:55.340 housing affordability crisis by scapegoating foreign buyers, for example. But they are the reason, 1.00

00:19:01.740 the government, government at all levels in this country is the reason that there's a housing

00:19:06.060 affordability crisis in Canada. The solution is more supply, not more spending, not more government,

00:19:11.580 not more bureaucracy. We don't need more government. We need government to get out of the way.

00:19:15.820 We need more homes. That's our show this week. Thank you for listening. If you liked what you heard,

00:19:19.980 please subscribe to our YouTube channel, share the show with your friends. If you follow us on wherever

00:19:25.020 you get your podcasts, please give us a five star review so others like you can find the show.

00:19:29.900 Thanks for listening. I'm Jasmine Moulton, and this is Reality Check.

Juno News - August 10, 2022

Reality Check： Why is housing unaffordable？ Too much government

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