Will the Build Canada Homes initiative help Canada's housing crisis？
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Summary
Austin Thompson is a senior analyst at the Fraser Institute specializing in municipal studies. He also writes a lot about the infrastructure projects going on in Canada. In this episode, he talks about the federal government's new initiative, the Build Canada Homes initiative, and why he doesn't think it's a good idea.
Transcript
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Hello, everyone. My name is Leah Mashett. I am a reporter here at the Western Standard,
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and today I have a guest named Austin Thompson. He's a senior analyst at the Fraser Institute,
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specializing in municipal studies. He also writes a lot about the infrastructure projects going on
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in Canada. So I was going to ask him about that today. He's written quite a few articles on the
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subject. So Austin, thank you again for joining us today. Good morning, Leah. Pleasure to be here.
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Good morning. Thank you very much. Okay. So basically, the first thing I wanted to talk
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about is the Build Canada Homes Initiative, which has been dedicated, $13 billion has been dedicated to
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the initiative. And you wrote in a recent article that basically the budget had kind of diagnosed
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the issue of infrastructure housing building in Canada, but did not come up with the correct
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solution. So why don't you elaborate a little bit on that and tell us why they didn't come
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up with the right solution and what the right solution would be? Yeah, you know, I thought it
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was interesting in this latest federal budget. They have a small section that lays out the narrative
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of kind of what's gone wrong in Canadian housing. And they list a number of things that I think are
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really the right things. They talked about regulations and red tape at the municipal level
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that make it harder for home builders to be able to build the sorts of homes that Canadians demand.
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They talked about high taxes on new houses. And yet the Build Canada Homes Initiative, which is,
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you know, one of the major new spending initiatives on housing by the federal government,
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is not really related to those issues in particular. The federal government is taking on a role that
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hasn't in a long time in order to be a developer and financer of major housing projects. And I just
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don't think that's what's needed at this point. There's plenty of demand for housing. There's lots of
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nonprofit and for-profit private housing developers who would be building more homes were it not for the
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tax and regulatory burden. We don't need a federal agency in Ottawa to be, you know, nudging its way
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into this market and competing with the private home builders for, you know, scarce investment dollars,
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scarce construction labor. It's just, it's not so needed at this point.
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Okay, so I want like viewers to get a really good sense of like, what the issue is here. So why don't we,
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if you don't mind, why don't you outline exactly what, I guess, the Build Canada Homes
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in the budget said was the issue, like the diagnosis, just to begin with. And then, yeah, we go from there.
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Sure, of course. Yeah. So, you know, I think the issue in Canadian housing, which was, you know,
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reflected in the budget is that, you know, it's difficult for private home builders to build the
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homes that Canadians want. You know, in many cases, home builders face restrictions on how high or how
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dense of housing they can build. There are plenty of taxes imposed on new housing projects by
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municipalities, but also provincial and federal taxes. And these, you know, issues conspire to make
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it such that, you know, new homes are expensive to build and some projects that would otherwise be
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viable or not viable. And so we end up with less housing than we need. And that's just a problem
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for which Build Canada Homes doesn't offer a solution. They're working on a different track
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that's saying, well, what if the federal government, you know, entered into the housing market as a
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housing financier and a housing builder? And it's not obvious that that's what's missing.
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Hmm. Since you've read a lot on the subject, is there any examples of something like this happening
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in like a different country that you would know and that it didn't work out or, yeah,
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it didn't go as planned, like a government wanted it to?
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Yeah. So, you know, in other places, governments get involved in housing, you know, more regularly,
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even in Canada, you know, at the provincial level, there is lots of housing, but it's typically
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constricted to a certain class of housing. You know, there are housing needs that people have
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that are difficult to meet sometimes in the private market if they have, say, a history of homelessness,
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of mental illnesses, of addiction, you know, people who need special services. And that's a little bit
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of what Build Canada Homes claims to be targeting, you know, that they say that they're going to enter
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into the affordable housing space and try and accelerate projects there. But as always, you
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know, Ottawa has a hard time keeping it scope limited. And so, you know, they've gone on to say,
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well, we're also going to build affordable homes for the middle class. And that's somewhat atypical,
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at least in the Canadian context, it's not typical for the government to be building homes for a class
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of people who should in theory be able to afford their own home and would in fact have more housing
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options available at a price they could afford if it weren't for the restrictions and taxes
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already imposed on private housing. And so we end up with this kind of bad trade where, you know,
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Ottawa is going to insert itself into this space. It's going to spend a lot of money on the projects
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that it thinks are worthwhile. And that will take away investment dollars and scarce construction
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resources from private projects that are otherwise driven by what Canadians want and what private
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developers can build at the most affordable price point. And so, you know, the real challenge here
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is that, you know, the federal government may in fact build a number of homes, you know, affordable
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housing projects. And I'm sure we'll get many news releases to say, you know, we supported X number
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of homes in this city and Y number of homes in that city. But what Canadians won't be seeing is that
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those projects took away construction workers and materials that could have otherwise been,
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you know, used in private secure housing developments. And so we get this trade-off where we get more
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of the housing that Ottawa wants, but less of the housing that regular Canadians want.
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Mm-hmm. And okay, this kind of related. In your most recent article, you were talking about how civil
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servants running the Build Canada Homes project are basically, yeah, not listening to like what private,
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private, sorry, private, oh, like home builders and stuff would be like wanting to do and how they
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want to develop. So why do you think they, well, at least from my understanding, it doesn't seem like
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they got the expertise of these types of people. So why don't you think they're listening to the
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average Canadian and maybe like experts who would know more about the housing market?
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Yeah. So it's a really fundamental issue, right? One pillar we haven't discussed really of Build
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Canada Homes, that's a somewhat separate stream that they're working on is, for example, that they
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want to make a big investment in factory built modular homes. And that's, you know, that sounds
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interesting. Maybe there are some advantages to building homes offsite and taking them there. But the
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reality is that there are many large, sophisticated private home builders in Canada who already use
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these techniques. The difference is that when the private sector uses these techniques, they only do
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so when it's the most affordable way to produce the housing that Canadians actually want to build.
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When the government steps in and says, well, actually, you know, we think for reasons that we
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haven't communicated well to Canadians that we're not building enough factory modular homes. They're saying,
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in essence, you know, I know better than the private housing developers, which housing
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technology will be the better one. And this is just the latest in a, you know, a stream of examples
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where Ottawa makes these big bets in the private market. We've seen them in electric vehicles. We've
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seen them with battery plants where they say, you know, people in Ottawa have discovered what the next
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big thing is, and we are going to take Canadians tax dollars and invest it in this new program.
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And it's just, you know, a strange credulity to think that those people in Ottawa know better than
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the people who actually work in these industries every day, who are doing, you know, the difficult
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work of, you know, private housing developers constantly in a relationship with its customers.
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It needs to know for its very survival, what do Canadians want and how is the most effective and,
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you know, cheap way to produce what Canadians want. And that's just not the set of incentives that
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people in Ottawa have. You know, the bureaucrats who will run Build Canada Homes are not in the
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position of a private housing developer. You know, if they make the wrong projects,
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their company doesn't fail, they don't lose their jobs. And their priorities are not to
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serve the ultimate customers, the Canadians who will be buying and living in those homes. They have a
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whole complicated set of other incentives to make the Kearney government look good, to spend in
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particular areas that sound good to Liberal government supporters. And that's just not the
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sort of incentives we want, you know, getting into the housing market at a time when we're very
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housing constrained. We don't have the construction labor or the resources to indulge the Kearney
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government, you know, pursuing its own priorities in housing at a time when we need those resources to
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be fully engaged in providing the market housing that Canadians really need.
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So from my understanding, I feel like you're saying as well, that probably if we want to solve this
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crisis, politicians or bureaucrats should be listening to these experts more.
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Yeah, well, it's not even just listening to them more. You know, this is an area of housing policy that
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the federal government does not need to involve itself in in the first place. You know, there are
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things that Ottawa can do that affect housing markets, you know, the general fiscal and economic
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conditions of the country make it, you know, easier or harder to invest in homes, the amount of take
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home pay that Canadians can keep after they pay their federal taxes. It's directly related to how much
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housing they can afford. These are the sorts of issues that that Ottawa ought to be focused on.
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They do not need to be involved really in any sense in financing or developing or building homes.
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You know, many other times in Canadian history, most of Canadian history, housing has been broadly
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affordable and that affordable housing was provided almost entirely by the private sector.
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And that happens when home builders are able to build homes without undue restrictions on the
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types of homes and where they can be built. And when they're not hosed with, you know,
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extraordinary taxes by all three levels of government.
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Well, also, I kind of wanted to touch on one extra thing that was interesting that you did a bit of a
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while ago, I think it was with another policy analyst, Jake Foss. And it was about, yes,
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and it was about the real estate of the federal government. Because you because it was just when
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the 3 billion was announced for the build Canada homes thing. And basically, you're saying they can't
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manage their real estate. Why don't you tell us more on that?
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So I thought this was a really interesting story, and very relevant as the Carnegie government tries
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to pitch to Canadians that that it should be involved in the housing market. And, you know,
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Ottawa should have a lot of say in the types of home that get built. You know, so the federal
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government has its own office buildings for its workers. And a 2017 study by the federal government
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itself discovered that 50% of that office space was being misused, unused, what was kind of just
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sitting there. And so of course, that's a not very good finding. I think any private company that
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discovered half of its real estate portfolio was being unused would would urgently try and solve the
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problem. But it really demonstrates in the years that have followed since 2017, the difficulties that
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Ottawa has accomplishing, you know, major complex projects in this space. So in 2017, they discover half the federal
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office space is underused. It takes them two years to make a plan. How are we going to, you know, dispose
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of, sell, lease, get rid of this unused office space? And then four or five years on, by budget 2024,
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they have accomplished almost zero reductions in the unused office space. And budget 2024, they say,
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okay, we have to get serious about this, we're going to set aside a billion dollars in order to sell off the
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land we have to pay for the administrative costs, get things up to snuff, sell it off. And they say,
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within 10 years, we'll have gotten rid of half of the federal office space, we'll have gotten rid of
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all of that space that was reduced. And a year later, the department that was put in charge of the project
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said, well, actually, we won't be able to get rid of all of that office space in 10 years, we'll only be
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able to get rid of 33% instead of 50%. And the Auditor General did an interesting report on this failing,
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and discovered just a lot of really essential issues. You know, the federal government didn't
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have basic information about its own office space, it regularly missed its own targets for office
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space reductions. And it was unable to get buy in from its own departments to say, you know,
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hey, departments X, we know you have office space you're not using, could you please reduce it?
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And the departments, in some cases, just did not reduce the office space, even though it was being
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wasted. And so I think this is just emblematic of the way in which government runs differently than
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a private business. There are competing interests within government, there are instances where even
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when there is a clear goal, not everyone can align to achieve it. And this is the sorts of conditions
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that Build Canada Homes will operate under as well. Build Canada Homes has a really ambitious,
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lofty sounding goal of working across all government departments, with provincial governments,
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with municipalities, with indigenous governments, in order to develop these homes. And I think Canadians
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should look at the experience that Ottawa has had with its own real estate portfolio, and just ask,
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you know, a fairly simple question of what is the evidence that, you know, this system can deliver
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on such a complex project involving so many different players?
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Hmm. I think that's a great question for them to ask. And I think this is a great place to stop,
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because now they can reflect. So thank you very much, Austin. I appreciate it a lot for you coming on.
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Perfect. Thank you so much, Leah. Thank you. Okay, well, if you guys are enjoyed this video,
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