Missed Opportunities to Achieve “Fairness For Every Generation” In 2024 Budget
Our government’s housing plan is missing key elements, like reducing speculative demand
A little while back our friend Urich shared a moving story with us in our Substack chat:
“Last night my best friend told me that he was mad as hell because of something his 15-year-old daughter said to him. Do you know what she said? ‘Daddy when I grow up I’m going to leave Ontario because I’ll never be able to afford a house here.’
He was genuinely pissed off. He works hard and has provided a wonderful life for his 3 girls: all brilliant and beautiful people. But there is nothing he can do to make housing more affordable. Like me, he knows the affordability situation across the country. He knows that by the time his girl graduates high school, if things continue in the current trajectory the cost of housing in Ontario is going to be up another 20 to 50 percent on average.
This is unacceptable! Our children cannot afford to buy homes in the communities they grew up in. Our children are going to be separated from their families, their communities, and everything they know because the cost of housing has grown outrageously detached from average incomes in this country.
When I was 15, I was not decrying the cost of living. My mind was focused on studying and having fun with my friends. What kind of legacy are we leaving for future generations when we rob them of their dream of home ownership even before they graduate from high school. This is not the Canada I want for our children.
If we do nothing else let’s make generational fairness a priority in Canada.”
We’re so thankful to Urich – and to other motivated Gen Squeeze supporters like him – who bring these all-too-common experiences to light.
It has become far more difficult for many young people to buy a home without help, especially for those living in more expensive urban markets. For previous generations it took an average earner just a few years to save up for a downpayment – now it takes decades. Overall, 66.5% of Canadians own their homes, but homeownership rates for younger people are falling fast.
The opportunity to own a home is no longer a testament to hard work and diligence. Too often, it hinges on your parents’ home ownership status, as Statistics Canada concluded in a recent report.
We agree with Urich that it’s time to make generational fairness a priority in Canada, to mitigate the harms being caused to younger Canadians. It seems the federal government agrees, given the choice of cover for the 2024 budget.
Today we’ll discuss some of the housing measures in the budget, and what they mean for the prospects of achieving “Fairness For Every Generation”. But first, a new podcast episode!
Curing Canada's "Sickness Care System"
Our health depends more on the conditions in which we are born, grow, live, work and age than on the medical care we receive. But for decades Canadian governments have devoted more and more of their budgets to medical care, leaving less money for the social supports that matter more for creating lifelong wellbeing. This unhealthy imbalance in government spending is a major obstacle in our quest to make Canada work more fairly for all generations.
We spoke with award-winning author and journalist André Picard about how curing our “sickness care system” will require greater investment in the building blocks of a healthy society. We’re on board with his prescription. That’s why our Get Well Canada campaign is working to grow investments in social supports even more urgently than investments in medical care.
“What's important for our health is not more doctors. It's more housing, and it's more daycare, and it's better welfare payments. It's dealing with the toxic drug crisis. These are things that ultimately will make the health of our nation better. Not just more sickness care.”
- André Picard
Listen to the full episode here.
Federal Housing Plan Could Do More To Achieve “Fairness For Every Generation”
As we discussed last time, it’s a big deal that the federal budget recognized the hardships younger Canadians are facing – because the first step in solving a problem is admitting that you have one. Where the budget still falls short, however, is on committing to specific steps needed to address each of the outdated policies that have been driving up home prices for decades.
The introduction to the budget describes Ottawa’s key ingredients for giving everyone “a fair chance to build a good middle-class life”. The first action is “building more affordable homes. Because the best way to make home prices more affordable is to increase supply – and quickly.”
More housing supply is important, but Gen Squeeze’s housing solutions framework makes clear that this isn’t the only thing that matters. We need a more comprehensive approach – one that addresses both sides of the supply and demand equation.
The best way to make home prices more affordable is to increase supply while also dialing down harmful demand – which includes disrupting our addiction to the wealth created for homeowners by rising prices. It’s disappointing that the federal government continues to ignore available demand-side interventions, which could help achieve widespread affordability more quickly and raise the revenue needed to expand the supply of affordable homes.
The budget also includes several policies about “Making it Easier to Own or Rent a Home.” Most attempt to improve affordability for first-time buyers by giving them access to more money and more debt. But these measures fail to address the root of the problem: home prices that have become disconnected from average local earnings.
Take the proposed increase in mortgage amortization from 25 to 30 years for first-time buyers purchasing newly built homes. This might be welcomed by some aspiring buyers looking for any way to get a toehold in the market, but allowing people to use more leverage to buy homes they couldn’t otherwise afford isn’t a sustainable solution. Just like taking on more credit card debt isn’t a good way to alleviate financial strain, it’s a questionable idea to enable people to take on more mortgage debt to cope with unaffordable housing. An overabundance of cheap credit is one of the reasons homes became so unaffordable in the first place, as Gen Squeeze has long argued.
It’s encouraging to see new policies aimed at giving first-time home buyers a leg up against investors, who can oftentimes afford to spend more by leveraging equity in their own homes. But over the long run, allowing first-time home buyers to take on more debt will add more fuel to the fire, driving prices higher. Better options would be to level the playing field by reducing the amount of leverage speculative investors can use – or taking steps to make residential real estate a less attractive investment strategy, like changing tax rules.
You don’t just have to take our word for it. Plenty of experts are having a hard time believing affordability will be restored by Ottawa’s plan to add supply and allow first-time homebuyers to spend more. Economist Derek Holt thinks that “Ottawa’s easing of mortgage lending rules is the last thing the housing market needs.” In his view, “new changes will drive more demand into a market with deep supply shortfalls and will worsen housing affordability over time.”
It is indeed pivotal that the 2024 budget acknowledges the disproportionate hardship younger people face in the housing market. Shining a light on these uneven generational impacts is a critical place to start. But there’s much more careful thinking and concrete policy work that needs to be done to position Canada to create a generationally fair housing system. We’ll keep up our efforts to remind Ottawa of this, and hope that you will too.
First and foremost, we’re counting on the Prime Minister to act on his earlier statement that “[h]ouse pricing cannot continue to go up”. Having the federal government commit to the goal of stalling home prices should be a touchstone for all housing policy, in order to reconnect home prices with earnings. To achieve this goal, we need our leaders to embrace hard truths about the range of policy reforms needed, rather than falling back on supply-related measures that evidence confirms will never be enough on their own.
Do you agree that the budget could have done more to promote generational fairness in the housing system? What housing policies would you have liked to have been included? Let us know in the comments!
That’s all for this time, thanks for reading.
Brilliant! Keep sharing our stories. Lived experience tells a story that numbers alone miss.
All the residential property capital gains must be taxed, no tax exemption for the first residential property capital gains.