Transcript: How can Canada stop skyrocketing home prices?

Angie Chan (00:00):
Guys, I've gotta tell you something. Word on the street is housing prices are skyrocketing out of control. What?!?! Okay. Seriously, seriously, this is not breaking news. Housing unaffordability is a symptom of generational and unfairness that most young Canadians know all all too well.

Angie Chan here, bringing you a special bonus episode of Hard Truths, Gen Squeeze's podcast about Canada's broken generational system and how to fix it across Canada. It's a hard and obvious truth that our housing system is completely broken. For those of us wanting to buy a home, settle in our communities and achieve some financial security and autonomy. But for people who own homes, the housing system is actually working fabulously well, making them wealthier while they sleep to dig deeper. Gen Squeeze recently hosted a live event about breaking Canada's dangerous housing addiction. The webinar was hosted by Dr. Paul Kershaw, Gen Squeeze founder, and my co-host for the Hard Truths podcast. Gen Squeeze thinks Canada is culturally and politically addicted to high and rising home values. And we think this is a primary reason. We don't prioritize restoring affordability for all. Dare I say, we are afraid of making housing affordable for all. Interest piqued? I hope so. Thanks for listening.

Andrea Long (01:32):
Well, my name's Andrea Long and I'm the Director of Research and Knowledge Mobilization at Gen Squeeze. And I'm speaking with you today from BC's Fraser valley on the unneeded traditional territory of the Katzie people. So Gen Squeeze is Canada's only organization fighting for generational fairness, but today what we're here to talk about of course, is Gen Squeeze's work on housing affordability. For most of us around the virtual table today, a home is our major cost of living that will face, and it's a cost that's spiraling at ever upwards. Hard work is not enough any longer to allow many Canadians to access a home. As the gap between housing prices and local earnings is becoming an unbridgeable chasm. Housing has become a key source of inequality in Canada today, between young and old between renter and owner and more so we're happy to have with this today, Dr. Paul Kershaw, who's a UBC policy professor, founder of Generation Squeeze, and a leading thinker in Canada about housing and generational fairness. Paul...

Paul Kershaw (02:34):
Well, thanks so much, Andrea. I'm really excited to be doing this first ever live podcast for our Hard Truths podcast series. And in today's episode, we are gonna focus on a hard truth that our country has a dangerous addiction to high and rising home values. And I say that as a policy professor who regularly talks about policy solutions to big problems facing us like housing on affordability and the childcare on affordability that Andrew just mentioned. And we made some progress today in Ontario and around climate change and intergenerational and fairness. And I, again today am gonna talk to you about policy issues and to some degree policy details, but I don't want anyone leaving this episode of the podcast that the root cause of our unaffordability problem in this country is a policy problem. Yes, there are many problems, but the root cause more and more in my view is that our country suffers this national addiction to rising home values.And I'm gonna talk about a variety of ways that, you know, we get sucked into that addiction and I'm gonna try and summarize this evening and then invite discussion with all of you about how we can rehab our country's cultural addiction to rising home values. And I'm even toward the end, my talk gonna be drawing attention to some public polling. That gives me reason for us to be hopeful that we can bring an end to this addiction. I think one manifestation of the addiction has been recently brought to our light by a great article in the Vancouver sun by Douglas Todd, where he asked this question, where are Canadians outrage at our governments over housing unaffordability and it outrage or rage is not typically a word that I, I think about in trying to embrace for Gen Squeeze word work. It's a strong word.

It's it can be a harsh word. And, and while we want to, to some degree to foment like a constructive frustration, I've tended to sort of stay away from the language of rage, but for today's podcast, I wanna kind of work with Doug Todd's idea about rage and how we might be able to harness it constructively because in the absence sufficient, publicly expressed discontent with our current housing system. We in Canadian society, we don't create enough political cover for our political leaders to act courageously in response to all of the evidence showing how dysfunctional our housing system is for those seeking homes that are in reach for local wages pay. And in the absence of creating that kind of outrage, we don't incentivize politicians to disrupt the relentless increase in home prices that we've been witnessing. We can't create enough, be bravery in the world of politics for our politicians to say, you know what, to restore affordability for all.

We need home prices to minimally stall. So that earnings have a chance to catch up. And this notion of home price, stalling may not sound that profound or even all that ambitious, but I'll remind listeners that it was just reading that the Canadian association of real estate Canadian real estate association I should say is predicting another 14 to 15% annual this year in home prices. On top of the 20 plus percent increase we saw the year before and very large increases. We've seen year over year in this country. So stalling home prices would be a really big achievement right now, maybe not the end game, but at least an important incremental step because so long as we tolerate high and rising home prices, our country is making it so much more challenging to scale up, not for profit housing, whether in rental or co-op or the social housing needed specifically to support the homeless.

And so long as we continue tolerate rate high and rising home prices, our country makes it so much more challenging to fix the regular housing market so that it delivers new supply and reach for what locals earn. And that is in particularly big deal in terms of, of rental, because as more and more people are pushed out of ownership, we have a growing number, especially if younger folks competing for available rental and as they compete for available rental, what do we do? We drive up the rental costs. And so that is a lousy consolation prize for being pushed outta the possibility of ownership. And let's just be clear how damn pushed out. We have seen younger folks in newcomers of any age be in this housing system. When my mom started out in the housing market, back in the mid 1970s, it took the typical young Canadian five years of full-time work to save a 20% down payment on an average price home.

If you flash forward to today, the data are clear. It's now taking 17 years on average in Canada. And for those of you in Ontario and especially a GTA, I'm gonna highlight at today for the longest time Metro Vancouver, where I'm base has had the highest levels of unaffordability. But in the last few months, regrettably, the GTA has also caught up with us. What's staggering is that over the pandemic alone, the amount of hard work that is required of a typical young adult to save that 20% down payment on an average priced home, it's gone from 21 years of work at the pandemic began to 27 in just two years of the pandemic. Young folks have lost six years of hard work. When it comes to paying off a 20%, it comes to saving, I should say, a 20% down payment on an average priced home, which is so much less often a house with a yard and more of in a condo with a balcony.

So that's the context in which we're working right now. And it's this context that we need to dive into understand why do we have a national addiction to high and rising home prices? And today I wanna briefly water ski over three ideas. The first is that our economy is addicted to rising home prices. The major contributor to Canada's gross domestic product. Our GDP is real estate. It's 14% of Canada's GDP. It's about whopping 20% in British Columbia, which would be great if you had 14% of Canadians making their living in that industry fewer than 2% do across the country and even in British Columbia. So then this is a strange way about going to go about growing our economy. What it means is that we are growing our economy by growing the major cost of living housing, those who make their living in industry disproportionately real estate agent, they're making good livings, homeowners like me get lovely wealth windfalls, but everybody else sees their hard work payoff less because the major cost of living is relentlessly rising while we're not producing jobs in that sector.

And so earnings fall behind it's one way to grow an economy, but it is absolutely no way to grow an economy. If you want hard work for again, young people entering the housing system or newcomers of any age to pay off related to that. The second reason we have this national addiction to high and rising home values is that our politicians understand, want to be able to claim that they are good economic managers. And the way that many a finance minister will do that is to point to what's going on with their economy as measured by the gross domestic product that I just showed you real estate is primarily driving in this country. And so we have finance ministers, including the honorables Selena Robinson in my province of British Columbia, regularly pointing out in their budgets. That housing prices are strong, strong, because they're contributing to GDP, which makes them sound like they're good economic managers.

But the very strength that the finance minister is claiming in budget documents is precisely the thing erod affordability for younger folks and newcomers of any age. And we need to be able to better manage that. We need to be able to hear when media talks about hot housing prices. No, that's not a sign of healthy housing prices. That's a sign of less affordability, which is remarkably unhealthy for our economy and our country and the many people living here. And the third thing that culturally calls our national addiction to high and rising home values is this broader cultural tolerance of housing, wealth, windfalls. Many, many people are attracted to rising home prices because it makes us better off. And I wanna share with you my personal story, which illustrates the issue this past year BC assessment told me that my home went by half a million dollars.

That single year increase is way more than I work. I earn as a hard working professor at UBC and I make a six figure salary at UBC. And it's actually in one single year. My home value's gone up by what my UBC and I have saved together in my pension over 17 years. And I haven't had to need cash out of my home in order to take advantage of that kind of wealth increase, which wasn't just last year, but it's many years before that. I mean, there's ways that I can borrow against my home record, low interest rates to make home improvements, to invest in the stock market. And these are all things that I have done and they make meat better off housing increases to the price of homes is real wealth. So people like me clearly benefit from rising home prices, but what's working for me is a double edged sword, harming people.

I care about like family members who aren't yet homeowners and they are struggling to find homes with enough bedrooms in which their kids can sleep, as opposed to having their kids have to go into closets overnight. And it's not great for colleagues of mine who are late, younger than me, but just as smart as me just as hardworking as me, but can't afford to live where I do simply because of the lottery of the time when they started the bad luck they had in terms of when they start out and it's not good for our communities and our society, because as a population health scholar, I can tell you that rising inequality between homeowners and those trying to get into the house system, rising wealth inequalities, they erode the determinants of health and they make our economy less efficient. And so that's why we increasingly need to focus on not just the regular people.

We tend to villainize when we're angry about housing, like, you know, that that uncaring foreign buyer or that uncaring developer or the illegal money launderer or the, you know, UN non neighborly, the nibi don't build new rental in my backyard. These are all factors that absolutely contribute to our housing systems problems right now. But we've taken a number of measures to try and address those things. Our governments have taken a number of measures to try and address those things. And they've been important things that gen squeeze has expressly called for, but they haven't yet been SU. And so when I think about Doug Todd's question, where is Canadians, where is Canadians rage at Ottawa and other governments over housing unaffordability, hows me recognize, ah, we need to push a little bit deeper to actually engage a broader range of everyday Canadians to say, how might we, especially homeowners implicated in a system that perpetuates over time, a relentless rise in home prices that leave local earnings behind.

We know that we can be provocative when we do that, we know that we can make people uncomfortable, perhaps people listening right now, but that is the intention behind our hard trues podcast and our series of event to try and push many, many Canadians myself included to look at how decisions we may be making are reinforcing the systems that give us these outcomes like arising housing, gun affordability that we may not expressly want, but may nevertheless be implicated in contributing to. And so it's pushed me every recent you, it pushed me recently to, to ask myself, am I describing what's going on in the housing system accurately? Indeed, we advertise this most recent live podcast session by saying, Hey, come learn about the broken housing system, but I'm not so sure it's broken. Sure it's broken. If we think the goal of the housing system ought to be supplying rental units and ownership units and co-op units that are reach for what locals earn this, system's clearly failing on that front.

But if you look at the housing system from a different angle, we can identify an alternate goal. And from this perspective, the housing system is working excellently. It is working excellently at growing wealth for homeowners. And that is especially the case in Ontario and British Columbia where wealth windfalls have become the norm over years and years and years benefiting disproportionately middle aged folks like me, older focus than me as well. But you can see to some degree that the cultural is also socializing, a younger demographic to kind of want the gravy train of relentless rising home prices to continue with polling data suggests young folks who've got into the housing market. As owners now expect their housing asset to also outperform or at least match the performance of other fine financial investments. And you can understand why that's the case. Having witnessed others, a crew wealth while cooking and watching TV and sleeping in their homes.

You understand like, "Hey, I'd like to have that too. That sounds great." But if we don't have a younger demographic at this moment, say no more, we know how hard it is to try and make a Govet make a home for ourselves as either as renters or owners or in co-op when the price of homes in the ownership sector leaves so far behind the local earnings and crowds out the demand for rental. And co-op, we know how hard that is. We need to be the group, the demands, stopping it a new way forward a disruption to this system. And if we're gonna that disruption, we have to better understand what's entangling so many people. And I wanna turn my comments now to that theme for the next few minutes. And then I'm gonna wind up. We would say half of half of our time left to take questions that I hope when we think about what is entangling people in this national addiction for and rising high and rising home values.

I don't want people to think there's like one silver bullet change we need to make. Gen Squeeze has been working for years to try and showcase the many policy issues that are implicated in our dysfunctional housing system that rewards homeowners and erodes affordability. So there's no silver bullet. There is silver buckshot. And today I'm only gonna focus on two themes that I think our country has been under discussing in the national dialogue and in the provincial dialogues, including in BC and Ontario, where we have the highest rates of unaffordability. So the first policy area that induces our national addiction to high and rising home values is the home owner should a tax shelter. And you might like what is a home ownership tax shelter? And it works like this. Anyone who went to paid work today is gonna have 100% of their earnings subject to taxation.

If you take some of your after tax income and you invested in the stock market, 50% of any return and investment you make in the stock market will be subject to taxation. But for homeowners like me increases to our home values and the principle residences in which we live are barely subject to taxation at all. And just like offshore tax shelters motivate moving money out of Canada to preserve assets. The home ownership tax shelter motivates us to bank on rising home prices to gain wealth and any policy system that turns home ownership into an investment strategy. Entangles owners in the hope that home prices will rise beyond local earn rings, but that's the very dynamic that is crushing affordability, harming younger and future generations. And so if we are gonna disrupt char disrupt our national addiction, we need to know it's now time to protect real shelters, much more so than tax shelters.

A second policy area that is really contributing to our national to high and rising home prices is the fact that our national statistical agency statistics, Canada, which does great work on so many areas. And so much of the data gen squeeze shares out to our constituencies. Drawing from stats, cancel. We are big fans, but when it comes to measuring housing inflation, as part of broader inflation in society, we have a serious concern. We know that statistics Canada is underestimating the degree to which housing inflation is happening. Indeed, they are not measuring the actual change in home prices, which over the last two decades have increased by over 300% in our country. Whereas over that same period of time, stats can reports that inflation is only gone up by less than 50%. Is that a big deal? Why should we care? It just sounds like a lot of math and who the heck knows why that might be important, but it's really matters because when stats can fail to capture accurately, the degree to which housing prices are increasing it, then doesn't signal that we've been actually suffering from inflation, not just in the last year or so, but for decades now, because the major cost of living has been leaving local earnings behind.

And then the stick six candidate is sending the wrong signal with its measure of inflation to the bank of Canada. The bank of Canada says, oh, we have relatively low rates of inflation. We don't have an inflation pro problem. So we can keep our interest straights and our other, our interest rates low and our monetary policy loose. But that then allows Canadians to borrow cheap credit. And when Canadians borrow cheap credit, what do we primarily do? We invest in the housing market. And when we borrow more, we bid up the price of housing more and then last stats can, doesn't sure that rising housing price. So doesn't measure inflation, accurately sends the wrong signal, the bank of Canada, which keeps interest rates low, which allows us to borrow more money, cheaply and bid up the price of housing. And you see, we have this vicious cycle happening over and over again.

So these kinds of policies, the home ownership, tax shelter, the MIS measurement housing inflation in the calculation of the consumer price index, and then its contributions to our sustaining a cheap credit system. They quietly attract enough Canadians to feed the housing systems, hunger, to grow wealth for homeowners. And I say quietly because much of the power of the system comes from masking the gluttonous way in which it satiates its appetite. We don't talk that much about the fact that what's making housing unaffordable for some is growing wealth for people like me. And I know that's the case because our national housing strategy and it's great that we had one when it was finally created now about five years ago, but never once does this strategy mention the word wealth? And if you don't mention the word wealth, we are not going to solve the problem as housing unaffordability because we won't, what's driving it and making many Canadians many existing own years tolerant of it.

It's cuz we get better off because of it. We ignore the many re the very reason why so many tolerate the problem in the first place. So what do we need to do? Well, we need to tackle these two policy areas and more, and we have been working at Gen Squeeze partnering with colleagues at the business the BCBC business council of British Columbia and and other experts to go and meet statistics Canada, to encourage them to improve their measurements of inflation, to get it housing inflation in particular to get at it right? So that we start sending the right signals to government at the bank of Canada. I'm delighted to take more questions about that in terms of what progress we're making and what more we need to do simultaneously we are making what has become quite a controversial recommendation that we start to chip away at the home ownership tax shelter by adding a surtax on home values over a million dollars for roughly the top 10% of Canadian homeowners in terms of the value of their home note.

We are specifically not proposing a capital gains tax, and I've been delighted to take questions about why that's the case, but effectively what we're saying is that for anyone who owns a home under a million bucks in Canada, and that's roughly 90% of Canadians, no additional taxation, but if you do own a home over a million dollars, like I do, can we ask you to contribute slightly more? And we're showing some of the values in this slide that we have in mind, it's modest increases for those who are in the million to 2 million range and only starts to really kick in for those at the top one, by percent up homes where you had over 3 million, it's not a new or scary idea. We already have property taxation on an annual basis, and we're adding, we're proposing to add some progressivity to it. We already have progressivity in our income tax space.

So why not add progressivity to our property taxation? And that would then allow us to take pressure off middle income earners and lower income earners, especially renters. So a bit of a tax shift ask PE high home value, high housing, wealth value folks to contribute slightly more. So we can take the pressure off middle income earners. We would exempt all per all rental buildings so that we can continue to incentivize having homes to rent out. And for those older folks that are especially house rich, but maybe income constrained, there are ways that we can ensure that we can defer their payments until the home is sold, or until it is inherited. All of these things could alter contribute to raising 5 billion a year, which could go into building green, permanently affordable co-ops and rentals or portable renters benefits and would be part and parcel of our asking the 10% of Canadians who own the most valuable housing in this country to tolerate a small price on housing inequity in order to demonstrate allegiance to the Canadian dream, that a good home should be in reach for what hard work can earn, whether as a renter in co-op or as an aspiring owner.

Now I'd be remiss to suggest that everyone likes this idea. And we have received a number of angry emails when we talk about this I'm right now showcasing that from William Lambert, don't know William, but you can see it's quite a short note F off and die. And we've received a range of other angry emails as we propose to chip away at the home ownership tax shelter. But I am delighted to point out that recent polling done by recent co. And I really thank Mario Canseco for leading this work on our behalf at Gen Squeeze shows that there's actually quite a lot of support for chipping away at the home ownership tax credit. Indeed 68% of Canadians are supportive of adding a modest surtax of the sort that we propose on the 10% of homes that are most valuable in this country. Even 62%, they do it on the top 25 per homes, and that would have the threshold drop well below a million notably though, when we talk about the difference between the top 10% and the enable the price name, the price that we propose, putting the surtax above a million dollars, you can see that the support drops slightly.

I also think it's really interesting homeowners who self-identify as being at homes over a million dollars, 64% of them in the pool said they support putting a modest surtax on the top 10% of homes in this country. But then when we labeled that value at $1 million, the drop support dropped dramatically down to 16%. So we can see that many Canadians in higher value homes don't recognize yet that they actually are in the top 10, 11, 12% of homeowners these days when they live in a home that's worth over a million bucks. And so that's part of the cultural change that we're gonna need to contribute to as we do. So we need to also wrestle with this cheap credits system. And there's a bit of tension in Canadian society right now. The polling shows that about 43% of Canadians say, yeah, it's a good idea to allow higher interest rates to reduce the amount that people borrow and thereby bid up prices about a quarter.

People think that's a bad idea, and you can see a chunk of people aren't sure, but at the same time you have actually a slim majority of people say, no, let's keep rates low so that people can borrow more only what a quarter of people think that's a bad idea. And then there's again, a chunk of people that are not sure. I think we're gonna really need to focus a gen squeeze and with others in this live podcast book, going after the, not sure to make clear that as individuals are trying to cope with a dysfunctional housing system, by boring and boring, more to try and close the gap between local earnings and higher home prices. That's an individual coping mechanism that ultimately drives the system to get worse for those who follow the, so let me end by saying, what the heck do we do?

There are a range of policy issues we need to press on including the two that I've just water skied over this evening. But let us be clear that we need to spend enough time talking, not just about policy solutions, but the root of the problem, the national addiction to high and rising home values. And as is the case of beating any addiction, we must start by acknowledging we have a problem, plenty of Canadians support the housing status quo, which is precisely why Douglas Todd observes. There isn't much outrage. And in the light of that, I stand before. I'm actually sitting. I come before you in our live podcast, a bit of a failure. I found a gen squeeze over a decade ago, and we have been talking about housing unaffordability for much of that time. And in the year, since we have attracted 37,000 people to our network, and indeed, you know what our network's actually stalled out of late.

And I know some of those folks are actually trolls on social media, maybe the Williams, one of them listening right now. It's not a very big number. And so clearly I'm by no means the best at building a movement, but let there be no mistake. That is what we need in Canada. A national movement demanding of one another, and of our governments that we finally break our national addiction to rising home prices that we build back better by building an economy that doesn't rely on real estate or dare I say, also fossil fuels to drive economic growth because neither of those industries contribute to sustainable growth. And so I'm thinking I wanna build on Douglas Todd and say, I think let's try constructively harness some housing rage. And I encourage people who are here this evening to share your social media challenges. What's making you frustrated. What's making you having housing outrage in terms of rising rents, rising costs of housing ownership, because we know that politics was responds to those who organize and show up.

And as part of that, as part part of sharing with hashtag housing rage, what makes you so VED about our current housing system, both those trying to break in, and those who are older, people like me, who are worried about others, that we care about being locked out of the housing system, as we share that hashtag housing rage let's do so in a way that we build up our numbers calling for home prices to stall. And this evening at gens squeeze, we are launching a new petition, demanding that our governments commit to the goal to affordability for all. We need home prices to stall so that earnings can catch up. I've got the URL for the petition up right now. I think it's being put into the chat as we speak. Polling shows that 70% of Canadians agree with this statement. If you are one of them, join our network, join the poll, share your hashtag housing rage. Because in the end, we must ensure that we disrupt this national addiction in order that every Canadian can afford a home that meets their needs either as a renter or as an owner or in co-op, and only then a will be able to ensure all Canadians have a chance, a chance to live up to our potential, a chance to have enough time and money to enjoy life and a chance to leave our city's country and planet better off than we found it. Thank you.

Andrea (30:54):
Thank you, Paul. So much for that really extraordinary presentation. You condensed quite a lot into a reasonably short period of time, which is an impressive skill. So we have a number of questions and comments that have come through the chat. I wanted to start off Paul by actually pointing out a comment from Jeff who talks about the challenges that he faces working in the real estate sector and seeing people struggle every day with unaffordable prices or people, people who are just priced out of the market altogether, and the kind of fear this creates for our economic future more generally. So you mentioned in your presentation, the contribution of real estate to GDP and how that factor makes our politicians more addicted to wanting to sustain the rising home prices, because it's such that we're doing good things as economic managers. I'm just wondering for that kind of big picture problem or approach to economic growth. How do you even think about the kind of movement you need to change people's minds about an issue like that?

Paul (31:59):
Well, first off, I think you said it was Jeff, who was the real estate agent. And so I just wanna applaud Jeff and say, thank you for one, it's a really important service that people provide in the real estate agency, as we try and get people set up to make what is often their biggest purchase and, and, and have that, that opportunity to make a home. The home is our castle. It's such an important part of, you know, having that security, et cetera. I'm not here demonizing real estate agents. I am here talking about how we grow our economy in a way that is not super productive. And if we can actually have real estate agents join forces with us and be unusual suspects in our movement saying, Hey, I wanna make a decent living, but I'm worried about the role that real estate plays in driving our economy.

Cuz what it's often doing is driving the major cost of living out of reach for what locals earn that is a really useful piece of useful piece to contribute to the movement. I would love to hear more, especially young real estate agents contributing in that way. And then we could have the real estate associations from coast to coast to coast be part of the movement because it is absolutely the case that real estate agents are seeing the challenges that a younger demographic and newcomers of any age are facing. And so, yeah, let's join forces. Jeff.

Andrea (33:10):
Thanks Paul. So then I wanna switch gears and there's a couple questions that have come in around your comments about inflation and interest rates. So to get to a little bit more of the policy nitty gritty there I'm gonna tell you the couple questions that we have and maybe you can respond to, to both at once. So one question from Chris is asking you pointed to the vicious cycle what you call the cheap credit system. But he or she is asking with inflation rising and interest rates on the rise as well. Is there a risk that we actually send the wrong signal to the bank of Canada in the opposite direction? So as interest rates rise and mortgage service crossed rise is that signal increased inflation, which spurs further increases in interest rates. So that's question number one. And the other question related to that is somebody asking if we're concerned that statistics Canada is not reporting accurately on housing inflation, where do we get data that is more accurate?

Paul (34:11):
Great. So that was Chris. I don't catch the second...

Andrea (34:13):
Question. Oh, sorry. That was from Lee.

Paul (34:15):
Lee. Okay. So this is all things inflation. Chris, it is the case that research will show that as interest rates rise, generally we can expect that will be a significant contributor to stalling home prices or put differently. If I, if you if I show you the data about what's happened with home prices, this sort of relentless increase, it is gone hand in hand with actually a re relentless decrease in interest rates over time. So we, it is the case that we know that as statistics, Canada measures housing inflation more accurately over time, it's going to be sending signals the, you that are likely to be saying, Hey, we have more inflation than we've been reporting so far. And that's likely to send an upward pressure on interest rates given that that pressure is already happening in the current context, because we do have some supply challenges, supply chain challenges as a result of what's going on in the horrible war in Ukraine and the pandemic disruptions on a range of, you know, goods and services and food.

That's giving us a new signal and the bank of Canada is beginning to respond to that. But if only the bank of Canada had been able to spa to housing price inflation years and years ago, we wouldn't have this level of unaffordability that we're facing now, which then brings me to Lee's question about where is the right data. And to be clear, stats can has a range of good data about what's happening with housing prices. The Canadian real estate association is another good source of that data and there are several others. What's not happening though. Is that in the calculation of inflation specifically, are we seeing stats can actually measure what's happening with home prices now when we've chatted with stats can and I I really appreciate Pedro and tunes as from the conference board of Canada and David Williams from the business council of British Columbia.

Joining me in sessions with Stats Can, and also colleagues from Better Dwelling. I might add, we have had conversations where they're recognizing that there might be value in revisiting how inflation is calculated and drawing another sets of data data, and in particular, what's going on with actual home prices. But stats can, is a bit worried about doing that out of step with other countries. And so this is not going to be a quick fix unless we have political pressure come from ministers offices responsible for housing, federally responsible for stats, Canada, federally provincial, pre mirrors and housing ministers and finance ministers. I think creating a bit of a ground swell, reflecting citizens calling on stats can to measure these measure, housing inflation, more accurately, we have the data we can do it. It's more of a methodological issue. And that gets us into a range of weeds for which I'm really glad David Williams at the business council British Columbia is around because he's one of Canada leading thinkers on how to fix this and take us from the weeds out into a more ho affordable housing system next.

Andrea (37:04):
Well, I'm gonna shift back to the bigger picture again away from the policy details. So there's a couple of questions that I'm gonna try and link together. So there's a question from who, and I hope I'm pronouncing your name correctly, Javani, who's pointing out that rising home prices are in the interests of some people in this case. They're suggesting the corporate political class...

Paul (37:31):

Andrea (37:34):
So the, the question is can we change that calculation of hour just with presenting policy alternatives, awareness or education building loving rage, which is a great expression, I think we should continue to use after this event. So I think the question really gets to the core of how do you create a movement for change at this level. And then the thing I wanna link it to is a question from Tom, which I think does kind of get at a similar kind of issue around how do we create this kind of change. So Tom is pointing out that how it's so frustrating that governments of any strip are willing to contemplate the art, willing to contemplate the options that you are sketching out in terms of taxation and other things. Because they're worried about the lack of support and the from homeowners. So he's asking, can you think of a precedent for what you're suggesting? So where have we actually successfully overcome this kind of broad sort of cultural addiction in another context, cuz how can we learn from that success and figure out how to make change in that way?

Paul (38:34):
Javani, if I'm saying that correctly, I love hashtag loving rage better than maybe housing rage. So if anyone wants to riff on that in social media land, by all means do that. And I know that soy and our gen squeeze team is gonna be monitoring that and I encourage her to riff on loving rage. I think the, I liked so much of almost lost track of the question. The question was like, how do we foster some of the, a constructive, loving rage?

Andrea (38:56):
Yeah, exactly. So how do we, how do we given that there are some people with vested interest in the current system, how do we actually make that kind of change?

Paul (39:03):
Yeah. So I actually think that love is a key source of the solution here because this is a generational tension. And when people gather at their next intergeneration some will be doing that not so long from now around Easter, et cetera whether it's Thanksgiving or whatever face base table you're sitting at, you're gonna have multiple age groups who are gonna be experiencing our housing system differently. Generally speaking, an older demographic, especially those in Ontario are going to have experie real gains from rising home prices. And they may not recognize to some degree how much they've gained or they may not often emphasize that they've been really counting on it or they care that much about it, but it sure does give a lot of security ability to move anywhere in that, in that community and stay in the housing system as an owner.

But they're gonna love people around the table who can't do that. And so I think that that, that the loving rage that Japanese is talking about can be fostered in part by a younger demographic constructively sharing that hashtag loving rage, but then inviting their parents and grandparents to say, I need your help, not just at our family level, because then sometimes you hear are the bank of mom and dad. And I hate that phrase. People can ask me why I hate that phrase so much. But you'll see some moments intergenerational transfers of wealth within families, but we need to bring that commitment to do intergenerational adaptations to the world of politics. So we need a younger demographic newcomers of any age struggling in the housing system to say this system is dysfunctional of affordability as our goal. And we need those who are benefiting from acquiring wealth to say, you know what?

I recognize that I don't need to organize my wealth accumulation strategy any longer around high and rising home prices. And if I'm like Paul Kershaw, who's gained so much, I'm willing to contribute more in the light of the wealth I've accumulated. So I can take pressure off other people, including people that I love, like my kids and grandchildren. So I that's one space then Tom says, but it's so frustrating that governments aren't doing this. And I liked how you said governments of any political Stripe. I think I heard that in your question because that's why this shows that this is a national cultural addiction. It's not really partisan because whether you're looking at Doug Ford, a conservative government in Ontario or premiere Horrigan and BC and NDP or prime minister, Trudo in at the federal level, that's a liberal government. So that's covering our political spectrum.

None of those political leaders are brave enough to say, to restore affordability for all we at the very least need home prices to stall so that earnings can catch up. And if we don't have that clarity of purpose about what we want from home prices, we can't fix unaffordability issue. So where do we find cultural disruptions? Well, I actually think Andrea, you signaled a lovely exam. It's not housing, but you're opening a remarks. He said, Hey, today premier Ford signed a deal for $10 day childcare. This is the last province to complete a national childcare system to really take shape in the coming years ahead. This was first recommended in the 1970 Royal commission on the status of women. For more than 50 years, we had plenty of evidence and you policy recommendations to say Canada is like an international laggard when it comes to investing in childcare, eroding gender equality in all sorts of ways, eroding healthy child development in all sorts of ways, but we were so slow to respond.

And more recently we have seen some progress made and it was largely because ARA movements were coming together alongside with some good framing. And I take real pride that the framing of a national childcare re recommendation around $10 a day, so that childcare would never cost another rent or mortgage size payment started in the gen squeeze lab. And then a movement took it on in BC. And then the framing caught caught strength in other jurisdictions. And then you saw when the federal government allocated its historic 30 billion investment into childcare over five years and then a nine to 10 billion annual investment thereafter that they said they embraced the $10 day branding framing and said never again, do they wanna see childcare another rent or mortgage size payment? So that inspires me to think that we can reframe the housing affordability issue in this country so that we stop only focusing on the challenges of like we are crushing the way that hard work pays off for younger folks and newcomers of any age. And we are hurting. In fact, the 20% of seniors who are renters, but at the same time invite those who are benefiting to say, how might we be implicated in sustaining this? And I think that that framing to focus increasingly on the wealth being pocketed by people is the flip side of the coin about what's harming others and then go to Japanese, hashtag loving rage. I think we can do something as productive on the housing front as we're now starting to do on the front.

Andrea (43:57):
Thank you. So I'm gonna switch back to a few of the policy detail questions again, and there's a trio that have come up at least a trio apologies. I may have missed some, but there's a trio that's come up around the housing surtax proposal. So again, I was hoping I could kind of put the three of them to you and you could respond with, with one answer. So Jeff is asking if there's been a change in the surtax rate that we proposed, cuz he's suggesting he had seen an earlier tax rate higher than the 0.0 0.2 that we're suggesting now. And just wondering if there's a reason for that.

Paul (44:36):
Wow, Jeff is an avid follower! Shout out to Jeff!

Andrea (44:39):
And I think similar. So on a similar note to that Adam was asking, why are we talking about the 1% when we think about putting in taxes on housing when any will increases are so much larger. So I'm not sure if the 1%, I'm not sure Adam, if you mean the 10% of high value homes, which Paul was suggesting a surtax would apply to..

Paul (44:59):
I'm interpreting, Adam is saying why a 1% value on home value over 2 million bucks. I'm happy to take that on it totally fits with Jeff. Okay. Yeah. And you said there's a third point.

Andrea (45:08):
Yeah, there's a third. And the third one gets more at the question of like, is it really that easy for folks? The 9% of folks in a home valued at over a million to contribute some additional taxes when they're already facing higher cost themselves with inflation and everything going up and you know, have you really considered the burden that that might create on homeowners? I thought you could speak to some of the details that deal with that in their tax proposal.

Paul (45:34):
Ray. And that third question was from whom?

Andrea (45:36):
No name on that...

Paul (45:37):
One. Okay. No name. Okay. So first Jeff it is the case that in 2018, if I recall my dates correctly, Gen Squeeze did publish a article in the Canadian Tax Journal as well as a working paper in BC that talked about having a 1% surtax on home value over a million dollars. You'll know now that we are proposing a ver a variation on that theme, because that reflects a process for the last a couple of years, we've done something that's called a solutions lab in partnership with the Canada Mortgage and Housing Corporation CMHC with funding from the national housing strategy to look for housing solutions and to try and disrupt some of the things that sustain our national addiction to high and rising home prices. It turned out that the home ownership tax shelter came up for discussion and a working group formed around that working group of academics and a range of other stakeholders in that the housing ecosystem.

And as people were think through the range of tax policy changes, we could make to adjust the home ownership tax shelter. People actually settled on the surtax idea, but proposed some slightly different rates than what Gen Squeeze was initially anticipating to try and increase its political palatability. Especially since in the year, since 2018, we saw so many more homes go up above what. And so the rate change from 1% above a million to the 1% kicks in above 2 million. And we have a graduated rate before that is in no small part about it being politically feasible to try and sell full stop. We were looking for something that might engage those around, you know, the top 10% of households because things, our speculation tax in British Columbia, you know, the province here brags that it affects less than 1% of residents. They're like, we need a bigger policy signal, but what's doable.

So we went around the 10% threshold, which brings me to Adam. Who's saying really, you wanna talk 1% above one or 2 million after there's been such increases in housing wealth, is that a big enough ask of people? And if people wanna critique gen squeeze for not being bold enough in proposing a tax shift where we are trying to capture more housing wealth windfalls from people like me in order to relieve tax pressure on folks in middle earnings, lower earnings renters, while investing in deeply affordable co-op and purpose built rental have at it, I think that's a reasonable critique, but that then leads into no name who asked. Is it really that easy for folks who have accumulated housing wealth to be able to contribute slightly more, especially in the face of rising I and another cost, et cetera, will often be older demographics who are going to be in that moment when they're not having earnings increases any longer, cuz when their pensions are more often fixed, et cetera.

And so that is one of the primary reasons why our tax policy proposal, this million dollar surtax says you will incur the tax on an annual basis, but you don't necessarily need to pay it until the sale of a home when the, the value the of your asset becomes liquid. In other words, if you sell your home or it's inherited at that moment, it's easy to free up the wealth that people have have captured as a result of wealth increases and or housing race price increases, I should say. And so we've tried to make that durability option yet another factor that tries to address some of the, of concerns that people might raise just as this no name person is suggesting, you know, sometimes the cash may not be free. And so it's more challenging to contribute the taxation, but let us also just put into context, the challenges that someone faces about contributing slightly more because they've gained wealth from a housing system that works for homeowners should not be ranked as more important than the challenges faced by many people locked out of the housing system. More generally increasingly locked out a home ownership, increasingly locked out of finding rentals that are in reach for what local earnings pay and with enough bedrooms to raise families cetera. There are, there is so much harm, so much hardship there at our housing systems creating right now, we have to make sure that as we are worried about balancing the pressures amongst a range of residents that we're doing it with, do care to the tremendous hardship, the housing system is creating for those locked out next.

Andrea (49:46):
Yes. Next there's lots actually. I'm I real conscious of the time and I know we're not gonna get to everybody, but I'll just remind people that particularly if you have questions on policy details or other aspects of specific proposals, you can definitely check out the resources on gen So I was hoping we could get to a couple more things before we run outta time. Paul one, I think is quite an interesting question from Andrew and it's about our framing of this issue overall. So he's asking what if we're using the language of addiction to high home prices, are we risking sort of equating the notion of this complex social problem we're having with housing to something that people often think as like a lack of individual control or a lack of individual ability to manage their, you know, own life. So is the addiction frame really the one that we want to use to suggest, you know, this complex capital structure which is causing us problems with affordability,

Paul (50:44):
That's brilliant and I'm not... so sure that we have settled on addiction as the metaphor that we will use indefinitely going forward. As we're trying to like stoke more loving rage about the broken or dysfunctional housing system. What I'm trying to do is make the case that systems generally produce the results that they're designed for, even if the line has been unintentional. And I'm trying to put on the, a table that we tolerate high and rising home prices and, and have done. So for the more than decade that gen squeeze has existed and for, and for long before that, because many folks benefit. And so we have to wrestle with the degree to which the hardship cause some is being tolerated, it's benefiting others and it's the benefiting others and or the entanglement of others. When, when we literally have our policies say treat housing is a good investment because that's what we're sheltering from taxation or we're our statistical agency is saying, don't worry too much about rising home prices because we're not even counting it in inflation adequately.

That's then distracting our attention as the nation from how problematic this, this shift to housing, not just being a place to call home, but also a way to get rich is playing out. And so the addiction to Andrew's point might not be quite the right framing. We have it done as the message testing and the thinking deeply about it. But I want to be showcasing. This is not a policy problem so much as we don't have Canadians creating political cover for politicians to bravely disrupt the dysfunctional housing system from a affordability system, cuz they're too worried about eroding the gravy train from the wealth windfalls produced for homeowners and that's the addiction and or the entanglement and or the, of, of the current status quo.

Andrea (52:32):
Thanks, Paul. And I just wanna end I wanna note that I know there's lots of questions we didn't get to and, and I'm sorry for those, if we didn't manage to ask your question, but as Paul said you're welcome to follow up with him. But I did wanna end with this last one from Serena. Cause I think it's a nice connection back to the overall purpose of this event and the petition that we're asking you to help us contribute, to raising our voices and asking asking our governments to help stop home prices for rising further. So Serena asks, given that prices, and she's specifically asking about Ontario all over Ontario are at such extreme levels. Can we really ever expect them to go back to low levels? They were even from just before the pandemic and if we can't expect that, how can earnings ever catch up?

Paul (53:17):
Yeah, that's a great question. And this is another person potentially pushing and saying you're not being ambitious enough. And I think that's a fair critique. I think more generally, I would say given the relentless increase, it would be a, an achievement for our country to actually stall home prices and sustain that stall for many years, the Canada mortgage and housing corporation has the goal that by 2030, every resident can afford a home that meets their needs. We are never gonna make that goal if we don't want minimally stall home prices and allow earnings to catch up. So home prices, stall, and then AF as earnings go up, you know, after inflation, definitely home prices are going down if we measure it properly. But the idea is to give the earnings a chance to go up. Are we gonna see double digit increases to earnings? The answer is no. And so I think it's Serena. I think our question is bang all on. It might not be bold enough, but right now, as we're trying to negotiate a cultural shift, a shift away from this national addiction, I think this is a potential sweet spot from a tactical standpoint where we could shift the world of politics.

Andrea (54:20):
Well, that's a great place to end, Paul, thank you so much. We really, as Paul said, several times, we really are encourage you to lend your voice to our campaign, to ask governments, to stop rising home prices. You can do that by channeling your constructive housing, rage, your loving rage into signing our petition. Our power does grow with the size of our network. So it's your voices that can help build our credibility and influence with decision makers.

Angie (54:46):
They thanks so much for listening to our bonus housing episode. If you want to learn more, check out Gen Squeeze's website. Reach out to us on social media or email info [at] Don't forget to look up Gen Squeeze on YouTube and check out our latest video. We hope you'll join us for our next Hard Truths episode about the myth of the lazy millennial. Until next time!


Transcript: How can Canada stop skyrocketing home prices?
Transcript: How can Canada stop skyrocketing home prices?
Check out Generation Squeeze. I just joined.
Hard Truths from Gen Squeeze
Hard Truths