When people speak about housing affordability in Canada, they often sight one factor that is central to delivering a solution: supply. Of course, supply should be viewed relative to demand and perhaps printing lots of money and making it available virtually for free (through low interest rates) has influenced things. However, the supply challenge is a great foil because it can be framed as everyone’s fault (except the speaker’s) or nobody’s fault. A political win, win. The other great thing about the supply argument is that it takes a very, very long time to evolve. That brings a mystical “the budget will balance itself” element to it.However, even if we buy the supply argument, how is this seen playing out? Do supporters of this theory want new supply to overwhelm demand and crash the housing market? Do they simply want to slow the growth rate of prices? Or do they want to stabilize or freeze the market where it is? What is the plan?With inflation, building supply shortages and tight skilled trade labour markets it seems unlikely that future supply will be cheap. With population growth forecast to include more than 400,000 new Canadians per year, on top of our natural birthrates, it seems that demand will be solid if not robust. The purchasing power of first-time homebuyers seems unlikely to grow significantly given inflation and our country’s increasing reliance on the Gig Economy. If there is not a significant downward mark in prices and all else stays the same, increased supply will not solve the problem of housing affordability. So then, what is the real solution?In previous posts we mentioned some of the programs that are in place across Canada and designed to help with housing affordability. These included the First-Time Home Buyer Incentive, the Mortgage Stress Test, the Rapid Housing Initiative, and Toronto’s Rapid Rehousing Initiative. Did any of these programs actually prove to be useful in any way? The short answer is no.<figure class="table" style="height:150px;width:100%;"><table style="border-color:hsl(0, 0%, 100%);border-style:solid;"><tbody><tr><td style="border-color:hsl(0, 0%, 100%);border-style:solid;height:150px;width:50%;"><figure class="image image_resized" style="width:100%;"><img src="https://files.rifo.co/CompanySite/18/18_Picture18_1.jpg"></figure></td><td style="border-color:hsl(0, 0%, 100%);border-style:solid;height:150px;width:50%;">The First-Time Home Buyer’s Incentive planned to help young people afford homes by reducing the mortgage of those with a minimum down payment, thus reducing monthly mortgage payments. This incentive is required to be paid back in full after 25 years or whenever homeowners sell their house. Experts reported that this was essentially useless. Toronto reported only 39 successful applicants and Vancouver reported only 9. It has also been reported that the government allocated $1.25 billion intended for 100,000 Canadians, but in 3 years only $216.5 million of this has been used. I mentioned in my last article on the subject that experts did not see this having a chance of working at all, as the current price of houses are too high for this to make a difference.</td></tr></tbody></table></figure>In addition, the mortgage stress test was introduced by the Trudeau government in 2016. This is a way to compare your income to your mortgage in order to determine affordability of being a homeowner. This is then used to see if you can afford your mortgage, compared to the lender’s minimum qualifying rate. This realistically does nothing to directly benefit home buyers, but rather only checks if they are equipped to handle home ownership in a modestly raising rate environment. Experts say that the coincidental slowing of application rates at the time it was introduced had nothing to do with the mortgage stress test.Finally, many major cities across Canada introduced the Rapid Housing Initiative, working to create fast, affordable, and accessible housing to vulnerable populations such as single mothers, Indigenous people, and homeless people. In terms of affordability, rent was not to be higher than 30% of an individual’s income and it must be maintained as such for years. As great as this plan sounds, and as much as this can make a difference for vulnerable people, this is not a long-term solution for increasing home ownership in Canada. The solution must involve creating conditions so that these vulnerable populations, as well as other Canadians, can move closer to home ownership and can be less reliant on rentals and the government.&nbsp;At this point, with prices where they are and with government programs not helping enough to make any significant difference, I believe the way to heal the housing crisis is through employment. Canada is currently experiencing a record low level of unemployment at 5.1%, but the type of jobs the economy has provided do not extend far beyond the tertiary and quaternary sectors. Manufacturing job counts continue to fall. Incredibly, 80% of Canada’s GDP comes from the service sector which provides 75% of the jobs. Most employees in Canada, according to Statista, work in either retail, education or health care. Fewer and fewer people are involved in primary and secondary industry jobs, with agriculture being near the bottom. This last point is a crisis in the making. Food security and its supply is a critical area where Canada should be leaders, but where we are falling behind as well. (Remember, having no food or only tainted food is worse for you than a change in the weather.)What is our best solution?&nbsp;Great jobs. Smaller government. Lower (much lower) taxes.&nbsp;To make housing affordability a reality for new buyers, without damaging the wealth of existing homeowners, we must establish an environment where great jobs are being created. Attract new businesses and manufacturing. Promote high value industries like mining and ethical Canadian oil and gas. Allow people to reach their full potential and provide for their families.&nbsp;Facilitate housing affordability through greater purchasing power for families and by increasing the ability of individuals to manage their own destiny.&nbsp;We need to cut taxes, reduce red tape, lighten the influence of government in the average Canadian’s life and let the entrepreneurial spirits flourish.&nbsp;This will take courage, but we can do it. And the supply won’t have to “balance itself”.

The Housing Affordability Fix: More Supply? How About Better Jobs?

When people speak about housing affordability in Canada, they often sight one factor that is central to delivering a solution: supply. Of course, supply should be viewed relative to demand and perhaps printing lots of money and making it available virtually for free (through low interest rates) has influenced things. However, the supply challenge is a great foil because it can be framed as everyone’s fault (except the speaker’s) or nobody’s fault. A political win, win. The other great thing about the supply argument is that it takes a very, very long time to evolve. That brings a mystical “the budget will balance itself” element to it.

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