PM Agrees That Housing Should Be Used As Homes First, Investments Second
Another step toward breaking Canada’s addiction to rising home prices
We are really excited about some recent comments from our Prime Minister. Last week, while discussing the factors that contributed to our housing affordability issues, Justin Trudeau said:
"...one of the factors that is challenging for so many people is the commodification of housing. The fact that people are using homes and houses as an investment vehicle, particularly corporations using homes as an investment vehicle, rather than families using them as a place to live to grow their lives to build equity for their future… housing can and should be owned by people who are living in them."
It’s huge that our PM has recognized that investor demand is driving up prices! Up until now, all of our leaders have primarily focused on a lack of supply as the cause of our unaffordable housing.
Just last week, the Bank of Canada reiterated this idea:
“There is a structural lack of supply in the Canadian housing market. So really until we address that supply issue, interest rates on their own are not going to help us get back to a housing affordability situation or solution. So we’re really pleased to see the degree of focus that governments are putting on this issue right now.”
However, it’s clear that there is more to this story than just a lack of homes.
New data from Statistics Canada tells us that investors own over 40% of condos in Ontario and that they have purchased an incredible 57.3% of all condos built in Ontario since 2016. All of this investor demand helps keep home prices high, limiting the impact that building new supply can have on restoring affordability. That’s why we need to break our addiction to high and rising home prices. Until we do, housing wealth windfalls will keep motivating Canadians to view real estate as an investment, rather than as a place to call home.
While it’s a step in the right direction, the PM’s recent statement still falls short. He only calls out big institutional investors – the easy villains that Canadians find convenient to blame for unaffordable housing. But they are only part of the story. Many regular Canadians are also banking on real estate prices continuing to rise. These ‘mom and pop’ investors – including many of the PM’s colleagues in Parliament – are contributing at least as much as corporate investors to our affordability problems.
So long as real estate is viewed as a commodity, rather than a place to call home, added demand from investors will continue to put upward pressure on prices – and politicians will be less likely to risk upsetting voters by curtailing rising prices. If prices stall (or fall), corporate investors tagging along for the ride will be less likely to jump on the housing bandwagon, because real estate will no longer be as attractive an investment strategy.
Paul had the opportunity to brief the Liberal Cabinet at their retreat this summer. It seems unlikely to be a coincidence that since then, the PM has taken quite a few pages out of Gen Squeeze's playbook.
Coming out of the retreat, Trudeau promised younger Canadians that his government would take action to ensure they have the same opportunities as the generations before them – a core principle of generational fairness. More recently, he acknowledged that we cannot allow home prices to rise any further. We have identified this as the right goal for our housing system for years, yet no political leader had ever previously affirmed this in public. It’s encouraging that the PM is now signally his agreement with another key part of our housing policy solutions framework, that we need to put an end to harmful demand from investors.
That’s all for this time, thanks for reading.
We’d love to hear what you think about all of this. See you in the comments section.