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Cheap money, shortages, investors and crime: The making of Canada’s housing crisis – Global News



In what promises to be a fiercely fought federal election, a bipartisan consensus has emerged on at least one top political issue: there is a “housing crisis” in Canada.

The Liberal, Conservative and New Democratic Party leaders have all used those words to describe the mind-boggling home prices and dearth of quality rental options that have come to characterize the country’s real estate. The Green Party has similarly called for affordable housing for all Canadians.

Read more:
Trudeau’s housing affordability plan makes pitch to ban blind bidding, foreign buyers

Breakneck price appreciation, once a problem limited largely to areas around Vancouver and Toronto, has become a national emergency during the pandemic, with Canada’s average home price rising by more than 30 per cent between July 2019 and July 2021, according to data from the Canadian Real Estate Association.

At the same time, COVID-19 has also brought renewed attention to the issue of renting. On the one hand, eviction threats during provincial stay-at-home orders have highlighted the plight of low-income renters, many of whom were disproportionately affected by job losses in the earlier phases of the pandemic. On the other hand, the quality and affordability of rental options is increasingly becoming a middle-class issue as well, as a growing number of prospective homebuyers feel permanently locked out of homeownership.

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O’Toole eyes housing crisis with million home pledge, foreign investment freeze

The front-runners are all going big with promises to tackle the crisis. Liberal Leader Justin Trudeau unveiled a pledge on Tuesday to build or renovate 1.4 million homes in four years. Conservative Leader Erin O’Toole has promised one million new houses in three years, while NDP Leader Jagmeet Singh wants to build 500,000 affordable homes in 10 years. And that’s just a taste of the many policy proposals each party has put forth on housing so far.

But how did Canada’s crippling housing woes come to be in the first place?

While there is no single or simple explanation, here’s a look at some of the main factors experts point to when explaining the country’s housing crisis.

Click to play video: 'NDP vows to make housing more affordable in Canada'

NDP vows to make housing more affordable in Canada

NDP vows to make housing more affordable in Canada

Low mortgage rates

Economists have long pointed to low interest rates as an important factor behind Canada’s home-price boom.

Mortgage rates for well-qualified borrowers have been in the low single digits for more than a decade, a far cry from the double-digit rates Canadians used to pay on mortgages in the 1980s and early 1990s.

Click to play video: 'Canada election: Liberals introduce 3-part housing plan'

Canada election: Liberals introduce 3-part housing plan

Canada election: Liberals introduce 3-part housing plan

Low interest rates have allowed Canadians to take on ever-larger mortgages and thus afford pricier homes. The amount of mortgage debt Canadians collectively owe stood at 1.7 trillion in September 2020, according to the latest seasonally adjusted data from the Bank of Canada. That’s up from around $1 trillion in mortgage debt a decade ago.

While mortgage rates were already low before the pandemic, they dropped even further after the onset of the health emergency, as the Bank of Canada used a variety of tools to lower borrowing costs and stimulate economic activity to soften the impact of COVID-19.

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Singh promises $5K rental support for Canadian families if NDP wins election

Among other measures, Canada’s central bank has left its key interest rate at a historic low of 0.25 per cent since March 2020. Movements in the Bank of Canada’s trend-setting interest rate directly impact variable-rate mortgages.

But changes in the central bank’s rate can also affect the interest on new fixed-rate mortgages, especially if there’s a widespread expectation that the changes will be long-lasting.

The Bank of Canada has repeatedly flagged high levels of household debt amid the housing craze as a concern. But it does not have a mandate to limit how much Canadians borrow or to keep housing affordable. Instead, the central bank influences interest rates with the goal of keeping inflation low and stable, an objective it pursues with considerable independence from the government.

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Here’s how home prices compare to incomes across Canada

With economic activity now picking up steam and inflation on the rise, several analysts believe the Bank of Canada will start raising its key interest rate sometime in the second half of 2022.

Higher interest rates are widely expected to put a damper on the housing market, CIBC economist Benjamin Tal has previously told Global News.

“Even a small increase in interest rates would be sufficient to slow down the market,” Tal said.

Click to play video: 'Canada election: Conservatives pledge to build 1 million affordable homes in 3 years if elected'

Canada election: Conservatives pledge to build 1 million affordable homes in 3 years if elected

Canada election: Conservatives pledge to build 1 million affordable homes in 3 years if elected

Canada isn’t building enough homes

Many analysts and industry insiders also point to another problem to explain skyrocketing home prices: there aren’t enough homes for everyone who wants to own or rent one.

Canada’s housing supply hasn’t kept pace with population growth, several experts say.

While national borders have been closed to most immigrants since March 2020 to limit the spread of COVID-19, between 2016 and 2019, Canada welcomed nearly one million new permanent residents, data from Immigration, Refugees and Citizenship Canada (IRCC) show. And between 2017 and 2018, net immigration accounted for 80 per cent of the country’s population growth, according to IRCC.

That increase likely helped fuel housing demand during the pandemic, Sri Thanabalasingam, senior economist at TD Bank Group, previously told Global News. Lower mortgage rates and a sudden desire for more living space amid the pandemic restrictions triggered what Thanabalasingam calls a “pull-forward” of housing demand, prompting many prospective homebuyers to pull the trigger on a purchase.

Read more:
What you can buy in housing markets across Canada for $500K, $1M and $1.5M

Soaring numbers of international student enrolment are also feeding into the demand for housing. In 2019 alone, Canada issued more than 402,000 new study permits, according to IRCC.

And a significant number of those students ends up settling here for the long-term, thanks to Canada’s easy path to permanent residency, economist Mike Moffatt has told Global News.

Southern Ontario is a striking example of the housing shortage. The population of the Greater Golden Horseshoe region, which stretches around Toronto and the western end of Lake Ontario, is estimated to have grown by 780,000 people in the five-year period between the second half of 2016 and the first half of 2021, according to an analysis by Hemson Consulting. That represents an increase of more than 50 per cent compared to the 510,000 people the area added in the previous five-year period, the data shows.

But in the same five-year span between 2016 and 2021, the region likely added only around 270,000 new homes, a modest increase from around 214,000 homes added in the previous five years, estimates Russell Mathew, partner at Hemson Consulting, which crunches the numbers for Ontario’s Minister of Municipal Affairs and Housing.

Click to play video: 'Priced out: Will the Canadian housing market crash? Why home prices may stay hot'

Priced out: Will the Canadian housing market crash? Why home prices may stay hot

Priced out: Will the Canadian housing market crash? Why home prices may stay hot – Jun 5, 2021

And when it comes to housing, generations matter, too. Housing demand is linked not just to the number of people who need a roof over their heads but also to the number of those reaching the prime family-formation and home-buying stage.

The largest number of millennials in Canada is turning 30 in 2021, Mathew notes.

“So what are they doing as they turn 30? Well, this is where they’re starting to pair up, thinking of having kids and, you know, maybe buying a house in the suburbs,” he says.

Read more:
Will the housing market crash? Why home prices may stay hot

Canada’s rental supply has also been suffering from chronic shortages. The national rental vacancy rate in 2020 was a mere 3.2 per cent and as low as two per cent in 2019, according to the Canada Mortgage and Housing Corporation.

Some blame the rental shortage on rent control policies that, they say, make it less profitable for corporations to build new rentals and discourage landlords from spending on repairs and upgrades.

Others, though, link the dearth of affordable rental options to regulations that favour condos, rather than purpose-built rentals, in areas designed for high-density development.

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‘Nowhere to go’ – Canadian homebuyers without family help are running out of options

For the first couple of decades after the Second World War, all urban areas designated for the construction of high-density housing tended to be, by default, reserved for rental units, David Hulchanski, professor of housing and community development at the University of Toronto, has previously told Global News.

But with provincial regulations introducing the condominium form of homeownership in the early 1970s, condos became competition for purpose rental housing in those same high-density areas, Hulchanski said. And, over time, condos edged out rentals.

Also, whether young Canadians are buying or renting, another aspect of the housing shortage is the scarcity of housing options fit for families. Some argue that Canada is not only not building enough homes but not building enough of the right kind of homes.

This is the so-called “missing middle” issue. Canada’s urban development, some housing experts say, is often split between large and expensive detached homes or tiny apartments in high-density units with few options for families with middling incomes.

It doesn’t help that the baby boomer generation seems increasingly inclined to age in place instead of downsizing, which would free up larger homes for growing families.

Click to play video: 'Priced Out: A look at why the hot housing market is out of reach for young Canadians'

Priced Out: A look at why the hot housing market is out of reach for young Canadians

Priced Out: A look at why the hot housing market is out of reach for young Canadians – May 28, 2021

Using homes as an investment

Another hot topic when it comes to housing is the issue of using residential real estate as an investment rather than a place to live.

The idea, of course, isn’t new. Owning and renting a second property, for example, has long been a way for Canadians to generate income and grow their money. But a number of housing market watchers say aspects of real estate investing have become problematic.

Soaring home appreciation makes housing an attractive place to put money, especially when low interest rates mean there are few options for investors to grow their capital without taking on considerable risk.

Investors accounted for 20 per cent of property purchases in Canada in early 2021 compared to just under 22 per cent of purchases in early 2018 and 18 per cent of purchases in early 2015, according to estimates from the Bank of Canada.

One worry is that investors can help feed the collective psychological frenzy that often sets in when home prices start to rise rapidly, pushing home values even further.

Another concern is about investors leaving homes empty or turning them into short-term rentals, which reduces the supply of housing available for Canadians to live in.

Click to play video: 'Priced out: Renters facing challenges during a red-hot pandemic housing market'

Priced out: Renters facing challenges during a red-hot pandemic housing market

Priced out: Renters facing challenges during a red-hot pandemic housing market – May 29, 2021

For example, when Andy Yan, director of Simon Fraser University’s City Program, analyzed 2016 census data, he found that Metro Vancouver had more than 65,000 homes that were either lying empty or occupied for only a short period of the year, more than double the number of empty homes in 2001.

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There’s a lifestyle penalty for renting in Canada — it doesn’t have to be so

Vancouver’s empty-homes tax has since prompted some homeowners to rent out their properties, but around five per cent of the city’s homes are still vacant, Yan says.

It’s also unclear how many of the properties that have joined the city’s rental stock are being made available to long-term renters rather than added to the pool of homes for short-term rentals, he adds.

Online platforms like Airbnb have also exacerbated the housing shortage in some of Canada’s hottest markets, some housing analysts say. A 2019 study by McGill University researchers, for example, estimated that Airbnb had reduced Canada’s long-term rental stock by 31,000 homes, with nearly half of active listings located in Montreal, Toronto and Vancouver. Several jurisdictions have since tightened regulations on short-term rentals.

But some say an oversized investor presence in the housing market can be a concern even when investors rent out their properties for the long-term.

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What a developer’s plan to buy $1B in homes could mean for Canada’s housing market

One source of concern is the growing presence of corporate investors like private equity firms, real estate investment trusts (REITs) and financial institutions in Canada’s multi-family apartment rental sector.

Martine August, a professor at the School of Planning at the University of Waterloo, previously told Global News that large corporate landlords have a track record of “systematically” pursuing rent increases in order to extract profit from their real estate investments.

And while small landlords are also usually motivated by financial gain, large corporations are more effective at finding ways to increase rents, according to August.

“They typically have a very sophisticated way to try to extract more value,” August says.

“(They) will invest in all sorts of things in those buildings that will allow them to extract more value from it — the types of building renovations that allow them to charge more rents, (or) above-guideline increases.”

In general, the overarching concern is that the secondary rental market — homes built for ownership but then made available for rent — comes with less security of tenure and higher rents than the purpose-built rental market, says Yan.

“Part of (the) challenge is really understanding how the secondary rental market plays a role in the rental system,” he says.

Click to play video: 'Your Money: What to expect as bidding wars heat up the housing rental market'

Your Money: What to expect as bidding wars heat up the housing rental market

Your Money: What to expect as bidding wars heat up the housing rental market – Aug 5, 2021

Using homes to launder dirty money

Yet another factor exacerbating Canada’s housing crisis is money laundering, some analyses suggest.

The Expert Panel on Money Laundering in B.C. Real Estate, for example, estimated that money laundering makes home prices in the province between 3.7 per cent and 7.5 per cent higher than they would otherwise be.

But money laundering in real estate has also emerged as a serious concern in Toronto, Montreal and other parts of the country.

Real estate lends itself well to money laundering, says James Cohen, executive director of Transparency International Canada. For one, real estate purchases are a way to launder large sums of dirty money. And when real estate goes up in value, it becomes an even better deal for criminals, Cohen adds.

“You can enjoy that money for a while by actually visiting that (home) and then you can see the property price go up, sell it, and now you’ve got legitimate cash,” he says.

Organized crime across the world uses real estate to launder money, but Canada’s pristine international reputation and lax anti-money laundering regime have made it an especially attractive destination for crooks looking for a place to park their funds, Cohen says.

“Opaque ownership” is the number one issue facilitating money laundering in Canada’s real estate, according to Transparency International. Using shell companies, trusts or “straw men” to hold title to property is an easy way for criminals to hide ownership from law enforcement and other authorities.

Click to play video: 'Evidentiary phase of Cullen Commission wraps'

Evidentiary phase of Cullen Commission wraps

Evidentiary phase of Cullen Commission wraps – May 17, 2021

While financial institutions have an obligation to verify who they’re really doing business with, it wasn’t until June of this year that Canada introduced similar requirements to others including real estate agents, brokers and developers.

Loose reporting requirements for the real estate industry made it easy for criminals to use all-cash transactions to evade scrutiny, Cohen says.

But even with stricter rules in place, it can often be difficult for private-sector entities to assess who really owns what, he adds.

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ANALYSIS: Election’s first week had a heavy focus on B.C. and a strong start from O’Toole

When it comes to housing, Transparency International and other anti-money-laundering advocates have long called for federal, provincial, and territorial governments to require disclosure of beneficial owners as a prerequisite for any property or land transfer and create a pan-Canadian, publicly available beneficial ownership registry.

In 2019, British Columbia created a publicly searchable registry of information about beneficial ownership of land in the province. Quebec, meanwhile, now requires beneficial ownership to be reported in its existing corporate registry.

In its 2021 federal budget, the Liberal government announced $2.1 million to support the creation of a public corporate beneficial ownership registry by 2025.

Still, even with a centralized, comprehensive registry in place, Canada will need to devote more staff, money and training to detect suspicious transactions and hold those responsible accountable, Cohen says.

“Money laundering and financial crime is a very technical area that takes years of experience to be able to enforce,” he says.

It’s little wonder that the ongoing work of B.C.’s Cullen Commission, which was established to determine how to tackle money laundering in the province, earned several mentions on the federal campaign trail.

Ottawa should listen carefully to the Commission’s final recommendations, which are expected later this year, Cohen says.

“You can’t just address money laundering province by province. It’s a national issue.”

© 2021 Global News, a division of Corus Entertainment Inc.

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COMMENTARY: Young Canadians are struggling economically. This election is our chance to fix that. – Global News



Much like nearly half of the country, I was hoping Prime Minister Justin Trudeau wouldn’t call an early election in the midst of a pandemic, but here we are.

Canada’s federal election will take place on Sept. 20, so the Liberals, Conservatives, New Democrats and Greens have just a few days left to convince young Canadians to vote in their favour. Top of mind for gen Zs and millennials? Employment.

Read more:
First-time voter says her choice for election 2021 reflects her ‘lived experiences’

Unemployment rates for young Canadians increased by six per cent from 2019 to 2020 — roughly twice that of older Canadians, a Statistics Canada study about youth employment published last month revealed. Indeed, by 2020, the unemployment rate for Canadians aged 15 to 30 who weren’t in school full-time hovered just under 15 per cent. This has been a trend since COVID-19’s arrival in March 2020 when the number of post-secondary working students dropped by 28 per cent from the previous month.

As StatsCan says, this relatively high unemployment rate suggests young Canadians joining the labour force “might see lower earnings in the years following graduation than they would have in a more dynamic labour market.”

Click to play video: 'Canada’s third COVID-19 wave creates ‘zigzag’ economy'

Canada’s third COVID-19 wave creates ‘zigzag’ economy

Canada’s third COVID-19 wave creates ‘zigzag’ economy – May 7, 2021

There’s a clear need for a post-pandemic recovery plan that supports gen Zs and millennials in getting jobs. Some even had to sacrifice internships and other entry-level opportunities that would’ve given them a foot in the door because COVID-19’s arrival not only meant that working out of the office wasn’t an option, but also that many companies weren’t yet prepared for the transition to remote working.

Case in point: One of my fellows who graduated from journalism school in the spring of 2020 lost out on a school-funded reporting trip to Rwanda and an internship — which could have led to a permanent job — because the newsroom decided not to bring on interns after the pandemic’s arrival. To make matters worse, due to his unique circumstances as someone who graduated right before COVID-19 hit, he neither qualified for Canada’s Employment Insurance (EI) program nor the Canada Emergency Response Benefit (CERB) because he hadn’t started working yet.

He told me the CESB wasn’t enough to support him, so he’s been living with his parents during the pandemic. The Canada Emergency Student Benefit (CESB) provided a scant $1,250 per month for eligible students from May through August 2020, and $1,750 per month for students with dependents and those with permanent disabilities. In most major Canadian cities, that amount would barely cover the cost of one month’s rent for a studio apartment.

Remote work isn’t a trend. It’s a fundamental shift in Canada’s work culture

Young Canadians with disabilities, who are less likely to be employed than their non-disabled counterparts, have even bigger economic barriers to overcome. Indeed, the election announcement effectively killed Bill C-35, the proposed Canada Disability Benefit Act, which aims to reduce poverty and support the financial security of working-age Canadians with disabilities.

As part of Canada’s post-pandemic economic recovery plan, our parties would do well to create green jobs. Not only will they contribute to the fight against climate change, which is a priority issue for gen Zs and millennials, these jobs will also help young Canadians get back to work. They include opportunities in the sectors of renewable energy, environmental protection, sustainable urban planning and more, as well as low-carbon jobs like teaching and care-worker roles.

Click to play video: 'Canada’s job seekers may have upper hand amid labour squeeze'

Canada’s job seekers may have upper hand amid labour squeeze

Canada’s job seekers may have upper hand amid labour squeeze

Despite some resistance to a snap election as the delta variant of COVID-19 picks up, our country’s politicians have an opportunity to improve the financial future of young Canadians across the country during a time when they’re struggling economically.

Now’s the time to shore up our youngest generations and future leaders.

Anita Li is a media strategist and consultant with a decade of experience as a multi-platform journalist at outlets across North America. She is also a journalism instructor at Ryerson University, the City University of New York’s Craig Newmark Graduate School of Journalism and Centennial College. She is the co-founder of Canadian Journalists of Colour, a rapidly growing network of BIPOC media-makers in Canada, as well as a member of the 2020-21 Online News Association board of directors. To keep up with Anita Li, subscribe to The Other Wave, her newsletter about challenging the status quo in journalism.

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Coronavirus: What's happening in Canada and around the world on Thursday –



The latest:

In Europe, about 3,000 French health-care workers were suspended for not meeting this week’s deadline to get mandatory coronavirus vaccinations, the health minister said Thursday.

Most of the people suspended work in support positions and were not medical staff, Health Minister Olivier Veran told RTL radio. The number suspended was lower than projected ahead of the Wednesday deadline.

A few dozen of France’s 2.7 million health-care workers have quit their jobs because of the vaccine mandate, he said.

France ordered all health-care workers to get vaccinated or be suspended without pay. Most French people support the measure. However, it prompted weeks of protests by a vocal minority against the vaccine mandate.

What’s happening across Canada

B.C. Premier John Horgan shows his provincial COVID-19 vaccine card in Vancouver on Thursday. (Darryl Dyck/The Canadian Press)

  • Southern health region sees biggest chunk of Manitoba’s 64 new cases.
  • P.E.I. announces 9 new cases related to Charlottetown school outbreak.
  • N.S. reports 34 new cases amid outbreak in unvaccinated northern community.

What’s happening around the world

As of Thursday, more than 226.4 million cases of COVID-19 had been reported worldwide, according to Johns Hopkins University’s coronavirus tracker. The reported global death toll stood at more than 4.6 million.

In the Americas, Cuba began a vaccination campaign for children between the ages of two and 10, saying it was necessary to curb the spread of the delta variant. Meanwhile, the nearby U.S. state of Florida has surpassed 50,000 COVID-19 deaths, officials said, despite recent steep drops in hospitalizations and infections.

PHOTOS | Children in Cuba get vaccinated:

In Asia, Chinese health officials say more than a billion people have been fully vaccinated in the world’s most populous country — that represents 72 per cent of its 1.4 billion people.  China has largely stopped the spread by imposing restrictions and mass testing whenever new cases are found. It also limits entry to the country and requires people who arrive to quarantine in a hotel for at least two weeks.

In Africa, the World Health Organization’s Africa director says COVID-19 cases across the continent dropped 30 per cent last week, but says it’s hardly reassuring given the dire shortage of vaccines.  WHO’s Dr. Matshidiso Moeti says only 3.6 per cent of Africa’s population have been fully immunized, noting export bans and the hoarding of vaccines by rich countries has resulted in “a chokehold” on vaccine supplies to Africa.

Elsewhere in Europe, in order for Italian workers in both the public and private sectors to access the workplace, they must provide a health pass — which shows proof of vaccination, a negative result on a recent rapid test or recovery from COVID-19 in the last six months — starting on Oct. 15. Slovenia and Greece adopted similar measures this week.

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Canada must 'learn from' the pandemic crisis in parts of the West, Tam says –



Canada’s chief public health officer says other provinces need to learn from the pandemic crisis in Alberta and Saskatchewan if they want to avoid the calamity now afflicting health services in those provinces.

“Don’t be complacent,” Theresa Tam said at this morning’s media briefing. “We have to be highly vigilant on this virus. When you see it accelerating, act fast because, I think, we have to learn from the situation in Alberta and also in Saskatchewan at the moment.”

On Thursday, Alberta Premier Jason Kenney reintroduced strict and sweeping measures to combat the spread of COVID-19 — including a new requirement that people provide proof of vaccination or a negative COVID-19 test to gain entry to some businesses and social events.

Alberta has more than 18,000 active COVID-19 cases — the most of any province right now. There were 877 people in the province’s hospitals with the illness on Wednesday, 218 of them in intensive care. Ontario, with a population more than three times Alberta’s, had 346 in hospital, with 188 in intensive care.

“It is now clear that we were wrong, and for that I apologize,” Kenney said in announcing the new measures.

Tam said that, despite the fact that a large majority of Canadians are vaccinated, there are still seven million Canadians who have not been vaccinated and intensive care units in areas where vaccination rates are low are filling up with people in their 40s and 50s.

“When enough people are infected, even rarer events, in younger adults for example, are going to become common,” she said.

Avoiding more school lockdowns

Tam said the Public Health Agency of Canada has looked at public health units across the country and found overwhelming evidence that areas with low vaccination rates are experiencing surges in infections. 

She said the regions of the country struggling the most with pandemic surges are in the West — Alberta, Northern Saskatchewan and northern and interior parts of British Columbia.

“If we want to keep schools open, for example, we have to make sure we manage the virus transmission … to protect kids who are under 12, who cannot get vaccinated at the moment,” she said.

WATCH | Dr. Theresa Tam on lessons the rest of Canada can learn from Alberta

‘We have to learn from the situation in Alberta:’ Dr. Theresa Tam

7 hours ago

Chief Public Health Officer Dr. Theresa Tam says the rest of Canada should learn from Alberta’s experience after the province announced strict pandemic restrictions to fight the rising case count. 3:31

In parts of the country where increasing the vaccination rate is proving to be difficult, Tam said, authorities should impose public health restrictions — limiting the number of people that can gather together, mandating the wearing of masks indoors, hand-washing and physical distancing.

If vaccination rates cannot be increased in those parts of the country and such public health measures aren’t introduced, Tam said, more restrictive measures — such as lockdowns and stay-at-home orders — may have to be implemented. 

“I think jurisdictions have to be prepared for that potential, but if you act early you can actually avoid those more restrictive measures,” she said.

“But if needed, more restrictions may have to take place and my colleagues are hoping that this can be done in a more localized manner in order to avoid the significant impacts of widespread restrictions. I think it can be done.” 

Tam said that while no provinces are immune from the highly transmissible delta variant of COVID-19, the provinces in Atlantic Canada have managed to control spikes in infection rates by acting “fast in putting down some localized measures.”

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