A homeless encampment in Toronto on Dec. 10, 2020.Chris Young/The Canadian Press
John Rapley is a political economist at the University of Cambridge and the managing director of Seaford Macro.
Canada’s economy is struggling just now, beset by both a housing crisis and a growth rate so low that real per capita income is falling. But what many of us don’t know is that the first problem is a principal cause of the second – which is to say, Canadians on average are getting poorer in no small measure because property investors have got richer. There’s probably no way around it: to revive the economy and overcome the housing crisis, property investors will need to take a hit, at least in relative terms.
Politicians don’t like to admit this. Prime Minister Justin Trudeau did say that “house pricing cannot continue to go up.” But what about bringing prices back down? When he became federal housing minister, Sean Fraser had said he wanted to fix the housing crisis without lowering house prices. His statement reflected what seems to be a widespread view that the private sector can be left to supply new houses for the market, leaving the public sector to focus on homelessness and concentrate its resources on building social housing. That way there would be minimal disruption to the demand and supply conditions in the property market.
But this is flawed logic. Trying to rope off public and private markets is no easy task. It was a feature of centrally planned economies in the Soviet bloc, and the prices in one part of the market eventually affected those in the other, whether legally or in a shadow economy. Research suggests that once the supply of housing increases, regardless of the segment of the market in which it is built, prices are depressed across the board. And lo and behold where it has been possible to ensure the supply of new housing has risen, prices have fallen, with Minneapolis, Minn., being a celebrated recent case.
Some worry that falling house prices would harm the economy, given the weight of the sector. But that’s just the point: if real estate is too big to fail, it’s too big. Think of it the other way around. If renters or homebuyers had to pay less for accommodation, they’d have more left over to spend on other things. So, too, businesses that had to pay less for their premises would have more left over for reinvestment in the enterprise. In fact the case of Minneapolis, one of the cities with America’s lowest inflation rates, reveals the economic benefits of such an approach.
The structure of the economy determines how resources are allocated. And right now, Canada is allocating a lot of its income to a sector that produces little output. Shifting resources away from rent-seeking toward productive activities would cause short-term pain in the rent-earning part of the economy. However, it would also improve the prospects of the broader economy accelerating.
I recently had coffee with a lawyer who advocates for the implementation of the right to housing. This would require legislative regulation of property investors like REITs or private equity funds, requiring them to strengthen tenancy rights or allocate a significant percentage of affordable units for lower-income households before getting planning permission or regulatory approval for new products or construction. Such proposals trigger the usual objections – that they violate the property rights of owners, or they reduce local democracy by removing the ability of owners to object to new developments in their community.
Such arguments hold little water, though. Regulatory measures don’t affect property rights, they affect the structure and conditions of the market in which owners operate. They exist everywhere. Canada’s regulatory and policy environment happens to favour investors, but that’s a political choice, not a function of the market. Other countries, such as Singapore, have built thriving market economies amid highly regulated real estate sectors.
Meanwhile the argument for democracy, while oft heard, barely withstands scrutiny. Allowing existing property owners the power to block new developments is less akin to democracy than oligarchy, as it amounts to assigning special powers to people based on their property ownership – in effect, a property franchise. And if they use the power to block other people gaining the right to own property, they are limiting those people’s right to an effective franchise, which is the essence of democracy. Western countries scrapped property franchises a long time ago. Trying to restore them through the back door should be called out for what it is: anti-democratic.
What fascinated me most about my conversation with the lawyer was that while she and I began from completely different starting points, we arrived at a similar destination. She approaches housing as a human rights issue, I see it as an economic one. When I look for the causes of Canada’s economic funk, I keep coming up against the housing crisis.
An abundance of affordable housing for all would lower infrastructure costs, thereby increasing labour mobility to produce more efficient resource allocation, enabling Canada to better exploit the economies of agglomeration that will be essential to the knowledge-intensive production that must be our future.
OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.
Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.
The change is scheduled to come into force on Nov. 8.
As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.
The program has also come under fire for allegations of mistreatment of workers.
A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.
In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.
The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.
According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.
The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.
Temporary foreign workers in the agriculture sector are not affected by past rule changes.
This report by The Canadian Press was first published Oct. 21, 2024.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
