More Homes Built Faster isn’t enough to deliver affordability to Ontarians
Ontario’s Conservative government released the More Homes Built Faster Act on October 25, 2022. If passed, the legislation will aim to expand the supply of housing in the province by speeding up construction, reducing obstacles and fees for development, and increasing density near transit and in residential areas. This includes streamlining new affordable and rental housing developments.
Expanding the supply of housing is necessary – but not sufficient
Increasing the supply of housing is a laudable goal, and an important part of redressing Ontario’s plague of housing unaffordability. Ontario deserves credit for putting this goal at the centre of its policy agenda, especially against the backdrop of the worst erosion of housing affordability of any province at any time in the last half century, as reported by Gen Squeeze this past June.
What increased housing supply is not, however, is a silver bullet for restoring affordability. It’s just one piece of one pillar in Gen Squeeze’s comprehensive policy framework to solve housing unaffordability, forever, co-developed with housing and policy experts from across Canada. Yes, it’s an appealing piece – one that diverse people can get behind. Because suggesting that we can drive down home prices by building more homes doesn’t call into question aspects of the housing system in which many of us are more personally implicated – like the enormous wealth many home owners have gained as a result of rising home prices, particular those fortunate enough to have bought into the market decades ago.
Points for targeting the easy villains
Ontario is continuing to move in the right direction on a range of problematic practices that can drive up harmful kinds of housing demand. It’s great to see Ontario proposing further crackdowns on unethical developers and land speculators, a policy framework to support municipal taxation of vacant homes, and an increase to the foreign buyers’ tax from 20% to 25%.
These are important steps forward, which is why we’ve included them in our housing policy framework. But we also know that they’re not enough. These measures are aimed at what the team at Gen Squeeze refers to as ‘easy villains’ – people who we don’t mind targeting in the name of housing affordability, because cracking down on them comes at little to no cost for most of us. But the experience of other jurisdictions shows us that we have to look beyond these easy villains to get the full story on housing unaffordability, and how to fix it.
To fill out the story, here are 3 key things missing from Ontario’s proposed actions.
Ontario’s plan doesn’t address housing wealth inequities that are intergenerationally unjust
No province can adequately address housing affordability without considering its undiscussed flip side: the massive gains many home owners have reaped in housing wealth – over $1 trillion in Ontario since 1977. The very same home price escalation harming many aspiring (often younger) home owners has grown the wealth of many established (often older) home owners. The fact that the rising cost of homes is a proven wealth accumulation strategy for owners means that they have a stake in seeing prices continue to rise, even though this comes at the expense of their kids and grandkids being able to afford a place to call home at all. There are ways that Ontario could address this double-edged sword, like putting a modest price on housing inequity – a solution supported by 61% of Ontarians according to recent polling.
Ontario’s plan won’t be enough to close the gap between home prices and local earnings
Gen Squeeze analysis confirms that a typical young Ontarian now must work 22 years to save a down payment on an average home. To close the gap between prices and earnings, average home values would need to fall $530k (over 60%), or average earnings increase by 150% to $137k/year. Additional supply can help to close this chasm, but not entirely on its own. That’s why Gen Squeeze calls for a ‘silver buckshot’ approach that makes use of the full spectrum of policy tools included in our solutions framework. This framework can point Ontario towards new chapters the province needs to add to its housing story.
Ontario needs to commit to a direction for home prices
Ontarians need to decide what is their primary goal for home prices: to stall, fall, or rise? After crunching the numbers on the home price/earnings gap, Gen Squeeze concludes that our primary goal should be that home prices stall for many years ahead – or even continue to fall, moderately, as they have in the last few months.
Although the housing market is often described as being ‘hot’ or ‘healthy’ when home prices are rising – with falling prices portrayed as a sign of ‘weakness’ – these descriptors expose the degree to which we view housing as an investment strategy. We need to disrupt this assumption. Recent trends underscore that, if housing markets are stalling or levelling out, they are doing so with prices remaining at untenably high levels. According to Canadian Real Estate Association data, home costs have only dipped back to what they were in 2021 – arguably a minor shift when viewed against the backdrop of decades of escalation. To reconnect prices with earnings, we need Ontario to commit to a sustained stall or moderate fall, and reorient housing and economic policies to achieve this goal.
The Ontario Budget will be upon us before we know it. Join us in telling the Ontario government why housing supply isn’t a silver bullet for restoring affordability, and urging elected officials to be brave enough to follow the evidence on how to reconnect home prices with the earnings of Ontarians.