Affordability can’t come at the cost of generational fairness—Ontario Fall Economic Statement

Finance Minister Peter Bethlenfalvy clearly wasn’t much concerned with generational fairness in his recent Fall Economic statement. His prescriptions for the province at a time of increased economic uncertainty fall well short of following the generational golden rule: to treat other generations as you would want your generation to be treated.

1. Ontario continues to ignore the intergenerational injustice of climate change. Young people will shoulder the lion’s share of climate risks and costs, a massive affordability squeeze* ignored by the Ontario government. The government is thinking only about short-term costs, extending for another year cuts to the gas tax and fuel tax rates. No doubt some Ontarians are happy to save the estimated $390 bucks at a time when household budgets are strained. But it’s false economy to think we can remedy affordability pressures by scaling back climate justice.
   
   * The Canadian Climate Institute recently quantified the current and future costs of climate change in their report, Damage Control.
   
   
2. Ontario continues NOT to invest fairly in young and old alike. The Economic Statement raises benefits for lower income retirees by almost $1,000 per person starting in January 2023, arguing that “it is key that Ontario supports those who need it most”(p. 74). This move is a precursor to further expanding eligibility for benefits to more seniors. 
   
   You’ll get no argument from us about the importance of supporting others, including the aging parents and grandparents we love. But assuming that retirees have the greatest need ignores the fact that this age group is less likely to be living with low incomes, and more likely to have gained significant housing wealth, compared to others – especially younger people and families. The Economic Statement is largely silent on support for younger generations, other than as a by-product of investments in skills training, transit, and the like. These programs may be useful and important, but they don’t disrupt the age imbalance that continues to plague government spending in Ontario (and elsewhere), as Gen Squeeze has documented. 
   
   
3. Ontario continues to treat housing as an investment strategy, not a place to call home. On one hand, the Economic Statement confirms that Ontario faces a “housing crisis that was decades in the making [and] has priced many new Canadians and young families out of the market” (p. iv). On the other, it claims that the housing market was “growing strongly” (p. 91) in 2021, and that rising interest rates are a “risk” (p. 92) to housing. It’s difficult to reconcile these claims.
   
   Suggesting that 2021 was a period of ‘strong’ growth in housing ignores that rising prices have crushed affordability for many. A recent Gen Squeeze report confirms that in the first two yeas of the pandemic, Ontario suffered the worst erosion of housing affordability of any Canadian province in the last half century. The result? In 2021, it took the typical young adult 22 years of full-time work to save a 20% down payment on an average Ontario home. Governments shouldn’t applaud a model of economic growth that is locking younger generations, newcomers and renters of any age out of the housing market altogether.
   
   As for the ‘risk’ posted by interest rates, it’s important to note that recent rate increases have coincided with stalling home prices – or even moderate price declines in some areas. While we may need to take steps to moderate the impact of higher borrowing costs on those with large mortgage, we can’t lose sight of the fact that this policy shift helps to restore housing affordability by stopping the relentless escalation in home values. In fact, had Statistics Canada better accounted for the 318% increase in home prices since 2000 in its inflation data, we might have gotten monetary policy that helped slow the housing market years ago – and avoided some of the worst harms for younger people. Instead, we had to wait for inflation in food and gas prices – themselves harmful to many – for the Bank of Canada to act. Addressing wild inflation in home prices shouldn’t be a side effect of addressing rising prices on other, smaller costs of living.

The next big milestone in Ontario will be the provincial budget. We’ve already recommended what Ontario should do to promote wellbeing from the early years onwards.  We’ll be watching to see what steps they take to make Ontario more fairly for all generations.  Join us to stay informed and help hold the Ontario government to account on the generational golden rule.