Our Goal: All Canadians Can Afford a Good Home by 2030
Establishing a home will always take hard work and sacrifice. But for too many young Canadians it’s starting to feel impossible. In many places, housing costs have grown out of reach and out of control.
In response, the Canada Mortgage and Housing Corporation ("CMHC") has adopted a goal that "By 2030, everyone in Canada has a home that they can afford and that meets their needs." *
This is the right goal. It balances ambition with specificity, and has the credibility of being associated with Canada's national housing agency. So, we're adopting it as our goal, too.
This will be very difficult. But, it’s doable.
*Affordability means total shelter costs don't exceed 30% of a household's pre-tax income and "meets their needs" means the home is both in an adequate state of repair and has enough bedrooms for everyone living there. Check out this CMHC article for more explanation.
To solve any complex problem you have to get the first principles right. If you don't, the system will continue to lean in the direction of the problem, no matter how hard you try to fix individual pieces. Here are three principles we think are necessary to fix the complex problem of housing unaffordability:
Adequate housing is a fundamental human right - The concept that all people have rights to which they are inherently entitled simply because they are a human being is one of the greatest unifying projects of our species. Cementing the concept of human rights allows us to defend against the worst tendencies of our political, social and economic systems, including the tendency to leave people without adequate shelter. Indeed, the right to adequate housing and shelter is recognized both in the Universal Declaration of Human Rights and the International Covenant on Economic, Social and Cultural Rights. As of 2019, it is also the framing principle of Canada's legislated National Housing Strategy. The cementing of human rights doesn't mean we don't take personal responsibility; rather, it expands the concept of responsibility to include both ourselves and all of our fellow human beings. To realize the right to adequate housing for all Canadians, we need to pick other first principles that lean the entire housing system in the direction of affordability instead of away from it. And that's where the next two principles come in.
Housing is a place to call home, not a way to get rich - One of the root causes of housing unaffordability is the so-called "financialization" of housing. We financialize housing when we treat the ownership of homes and land as an investment strategy — hoping to gain more wealth than we put in through principal payments and our own labour and improvements, plus inflation. Financialization is a core tension in the housing system because it pits the twin goals of affordability and ownership profitability directly against each other. We need to choose. And if our goal is to ensure all Canadians can afford a good home (as renters or owners), then our choice must be to design policy that treats housing simply as a place to call home, not a way to get rich.
Make room for everyone - Even if we successfully eliminate all sources of harmful demand from the housing market, and through tax and other policy ensure that everyone treats housing simply as a place to call home and not a way to get rich, we still need to build a lot of new housing to ensure everyone can afford a good home (as renters or owners). Making room for everyone means being open and welcoming of a diversity of new people and well-designed buildings in our communities and neighbourhoods, especially in low-density neighbourhoods close to jobs, amenities and transit. This isn't just an affordability imperative, it's increasingly a climate change imperative.
Our basic plan
Affordability can be restored through some combination of higher incomes and lower costs. In many Canadian communities, housing costs have risen so sharply that it’s unrealistic to expect young peoples’ incomes to catch up.
So, while we also need to wrestle with the future of work and incomes, this basic plan focuses on reining in costs.*
To rein in costs, we need to scale up the non-profit market and fix the regular housing market. 👈 To succeed at both, we'll need to rebalance how we tax property wealth vs. income, protect vulnerable households and our economy against a decline in prices, and continually improve housing data and our understanding of it.
* While this gameplan focuses on reining in housing costs, we also need to rein in child care, parental leave and transportation costs, which themselves can add up to mortgage or rent-sized payments.
Sketching some details
Building on that basic two-path plan, we can start sketching out some details.
Path one - scale up the non-profit market
We need to shore up and scale up all manner of non-profit housing to serve a range of incomes and needs and to guarantee affordability on a more permanent basis. This includes shelters, transitional and social housing to serve the most vulnerable and a diversity of community housing models that use co-operatives, land trusts, covenants, shared equity and other mechanisms to provide an array of rental and ownership housing across the spectrum.
We’re currently encouraging governments to:
Shore up the existing stock — with federal and provincial resources and supports to address a backlog of maintenance and required upgrades.
Expand the stock — with government loans, capital, land and other supports to the community housing sector, and with incentives for both institutional and individual owners to add their own land and/or homes to a permanently affordable stock. Due to the scarcity of available land in our urban centres, there is an imperative to leverage — and not simply liquidate —public land for this purpose.
- Create strategies to serve the most vulnerable — including groups identified in Canada's current National Housing Strategy: women and children fleeing domestic violence, seniors, young adults, Indigenous peoples, homeless people, people with disabilities, those dealing with mental health and addiction issues, veterans, racialized groups, and newcomers.
Non-profit housing is a vital — and currently minor — component of Canada's housing system. Even as we seek to aggressively expand it, the majority of Canadians will continue to rely on the regular housing market for the foreseeable future.
Path two - fix the regular housing market
We know the regular market is broken because housing costs are no longer coupled with local earnings in many of our communities, particularly for young people. We can get the market working for us again by dialing down harmful demand, dialing up and upgrading the right kind of supply, and dialing up protections for renters and rental housing. Adjusting these dials won’t guarantee affordability, but we can use them to push the market’s creative energies in the right direction.
We’re currently encouraging governments to:
Dial down harmful demand — by tracking and restricting global capital flows into local real estate, eliminating hidden ownership, penalizing excessive speculation and "flipping," cracking down on money laundering and fraud, taxing empty homes, restricting and regulating short-term rentals, and holding the line on mortgage stress tests and amortizations.
Dial up and upgrade the right supply — by opening up low-density zoning to make room for a diversity of people and homes with an emphasis on more family-sized units and a lot more purpose-built rental (e.g. enough to get within the 3-5% vacancy range), an aggressive focus on energy efficiency and green building, and by introducing new provincial and federal infrastructure incentives to encourage municipalities to facilitate new supply.
Dial up protections for renters and rental housing — by protecting the rental housing we already have and by ensuring strong tenant protection and assistance policies.*
*A note on rent control: rent controls are extremely problematic. On the one hand, we support them as a short-term tool to prevent exploitation and gouging in overly tight rental markets, where tenants end up being much more vulnerable than landlords. On the other hand, rent controls disincentivize building new rental housing, which we desperately need in order to achieve and maintain long-term housing access and affordability (i.e. to prevent the perceived need for rent controls in the first place). We believe there's likely a balance whereby rent controls can be set to prohibit extreme rent increases while still allowing for a flood of new rental housing to pencil out.
To support action in both the regular and non-profit housing markets, we also need to:
Rebalance housing and income taxes
A well-designed #TaxShift — e.g. lowering income taxes and raising taxes of property wealth — will benefit the vast majority, keeping more money in our pockets, reining in housing and land costs and addressing inequalities between renters and owners and young and old. Another way to put it: rebalancing our tax system will help us dial down harmful demand and enable more affordable supply.
De-risk the market against a decline in prices
As we rein in costs, we have to be mindful that declining home values carry risks for both highly-leveraged households, including many young Canadians who clawed their way into sky-high markets, and the economy writ large. One idea to soften this landing is to scale up the federal Home Equity Share program (a.k.a. First-Time Homebuyer Incentive), but this is an area that needs more work.
Continually improve data collection and synthesis
Through it all, we need to continually improve our collection and synthesis of housing market data to make the best evidence-based decisions possible. This should include a federal beneficial ownership registry, additional information on global capital flows into Canadian residential real estate, and the current extent of non-resident ownership of local housing.
Within that basic plan, our current priorities are:
Reducing harmful demand from short-term rentals
Research has shown that the conversion of residential units (e.g. secondary suites, laneway houses, entire residences) to full-time short-term rentals (STR), facilitated by digital platforms such as Airbnb, is contributing to a lack of available and affordable housing in many communities across BC and Canada.
In response, some local governments have attempted to regulate this disruptive industry, including major centres like Vancouver, Victoria, and Toronto as well as smaller, tourist-oriented communities like Whistler and Tofino. A range of regulatory approaches have been tried, with mixed results.
Supported by the Real Estate Foundation of BC, the Federation of Canadian Municipalities, Landlord BC and Vancity Credit Union, Gen Squeeze is consolidating current best practices and lessons learned into a single toolkit to help more local governments across BC and Canada regulate short term rentals in ways that are practical, cost-effective and locally-tailored, and to help make existing regulatory approaches more effective.
Solutions Lab with CMHC
Responding to trends in housing unaffordability, wealth and inequality – as well as the financialization of housing – Generation Squeeze is working with the Canada Housing and Mortgage Corporation to bring a broad range of stakeholders together to tackle a persistent catch-22: the more we make home ownership profitable, the more we make housing unaffordable.
To help unravel this catch-22, the Solutions Lab will ask participants to answer the question: "After COVID, how can we treat housing as a place to call home, rather than an investment vehicle?"
Housing generates investment wealth in different ways. In this Lab, the focus will be on wealth generated by rising home values.
Possible answers to this question could range from dramatically expanding non-profit housing or other supply-oriented measures, to demand-oriented measures or broad or narrowly-targeted tax policy. Beginning in Sept. 2020, participants will explore the question and kick off a process to choose a solution(s) of focus, and develop a proposal for its implementation.
A report will be released in late 2020 or early 2021 detailing the groups' proposal and findings.
Targeted participants will include non-profit and for-profit housing providers and builders, financial institutions, academics, think tanks from across the political spectrum, people with lived experience of housing unaffordability, groups working with vulnerable populations, and others.
- Federal budget 2020
Now that the federal election is over, we need Canada's newly elected federal government to move urgently on a range of policies to ensure all Canadians can afford a good home by 2030. Stay tuned...
A shared housing policy framework
This whole article ☝️ is an example of a policy framework. To solve a complex problem, you need a good framework that paints a bigger picture and holds it all together. And good frameworks are built by unifying as many perspectives as possible. A continuing priority of Gen Squeeze is to test and improve our own housing policy framework through collaboration with housing sector leaders and ordinary Canadians.
Through 2020 we'll be doing this as part of our work with the Housing Research Collaborative, hosted at the University of British Columbia.
"Explanations exist; they have existed for all time; there is always a well-known solution to every human problem — neat, plausible, and wrong." — H. L. Mencken
The housing system is dynamic and complex. That shouldn't stop us from acting boldly, but it should keep us wary of potential oversimplifications and unintended consequences.
At the end of the day, we're all in this together and we need to work together. That doesn't mean agreeing on everything, or presuming we'll ever get it perfectly right...
... it means treating each other with respect and building common ground.