The federal government’s enormous bet on new construction is unlikely to have much of an effect on soaring home prices, some economists and housing experts are warning.
The strategy to massively ramp up construction of new homes across Canada is the centrepiece of the Liberal government’s updated housing strategy, which itself was the focus of the 2022 budget.
The spending plan sets aside $4 billion to create a Housing Accelerator Fund, a program still in development meant to help municipal governments speed up new housing projects.
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Ottawa says that fund will contribute to building the 3.5 million new homes it argues Canada needs over the next 10 years.
“The solution to housing affordability is housing supply,” Housing Minister Ahmed Hussen told the House of Commons earlier this week.
But some observers say that approach is based on misinterpreted data and the tendency of politicians to oversimplify complex problems.
No evidence that more homes means lower prices: expert
“[The government] seems to have bought into the proposition that any supply is good, and if we flood the market with supply that will bring down prices,” said Steve Pomeroy, a researcher at the Canadian Housing Evidence Collaborative at McMaster University.
“I don’t think there’s any evidence that will actually happen,” said Pomeroy, who has described the undersupply argument as a “myth.”
Christine Whitehead, an emeritus professor at the London School of Economics, said the identification of undersupply as a cause for high prices has been “absolutely consistent” among governments across the world.
‘The honest answer to the affordability crisis is much more tied up in macroeconomics,’ said Christine Whitehead, emeritus professor of housing economics at the London School of Economics. (The UK Collaborative Centre for Housing Evidence)
Whitehead — who said she has studied the economics of housing for “many decades” — said a narrow focus on speeding up new construction makes for an appealing political pitch but rarely makes a dent in prices.
“Most normal people would think that a lot more housing would make things better,” she told CBC News.
“Just building 100,000 homes a year or 200,000 homes a year is not going to make that much difference, of itself, to house prices.”
Pierre Poilievre has made housing affordability a central theme of his Conservative leadership campaign. He also has identified a lack of supply as the prime culprit driving up prices.
The NDP has been calling for new housing construction, with the caveat that newly built homes should be earmarked for low-income families.
How many homes does Canada need?
The federal government, opposition parties and numerous economists have in recent years argued that Canada doesn’t have enough homes for its population.
A 2021 paper by Scotiabank reported that Canada has the fewest homes per 1,000 residents of any G7 nation, something the bank described as a “structural housing shortage.”
The 2022 budget includes a similar analysis which shows that Canada is below the OECD average for homes per 1,000 residents — behind France, Japan and Germany, but ahead of Australia and New Zealand.
Pomeroy said statistics like those don’t adequately support the government’s undersupply argument since other important factors are left out — such as the fact that Canada has the second-largest average household size in the G7.
He said Canada’s recent pace of new housing starts has kept up with population growth — even as home prices have been hitting new record highs.
“When you look at the data, it doesn’t support this idea that we have a lack of supply, certainly at a national aggregate level,” Pomeroy said.
Housing and Diversity and Inclusion Minister Ahmed Hussen has said repeatedly that a lack of supply is behind Canada’s housing affordability crisis. (Adrian Wyld/The Canadian Press)
Robert Kavcic, a senior economist with the Bank of Montreal, also has questioned the government’s ability to stimulate more construction.
“The challenge here is that we are already seeing a record number of units under construction, and the sector is pushing against labour and capacity constraints as it is,” he wrote in a response to the budget.
Kavcic also noted that if the government succeeds in accelerating new construction, it could backfire by driving up material costs and aggravating inflation, pushing housing prices higher.
Ottawa says other factors contributing to high prices
In an email to CBC News, a spokesperson for Hussen added nuance to the government’s argument that undersupply has driven up prices.
“There are a number of factors that are making housing more expensive, but the biggest issue is supply,” wrote Daniele Medlej.
“However, we recognize that there are other elements at play, which is why we are putting in place multiple measures to curb unfair practices in the housing market, including banning foreign homebuyers, introducing an anti-flipping tax and banning blind bidding.”
Whitehead said government efforts to boost new supply and change regulations are dwarfed by the forces of macroeconomics, such as income levels and interest rates.
Short of instituting politically toxic measures such as capital gains or inheritance taxes, she said, the Canadian government will have little direct control over prices.
“I wish I could be more cheerful about it,” Whitehead said. “What I am saying is that there’s no harm in building houses. You should still go on building the houses and try to allocate them to people in need.”
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VANCOUVER – Contract negotiations resume today in Vancouver in a labour dispute that has paralyzed container cargo shipping at British Columbia’s ports since Monday.
The BC Maritime Employers Association and International Longshore and Warehouse Union Local 514 are scheduled to meet for the next three days in mediated talks to try to break a deadlock in negotiations.
The union, which represents more than 700 longshore supervisors at ports, including Vancouver, Prince Rupert and Nanaimo, has been without a contract since March last year.
The latest talks come after employers locked out workers in response to what it said was “strike activity” by union members.
The start of the lockout was then followed by several days of no engagement between the two parties, prompting federal Labour Minister Steven MacKinnon to speak with leaders on both sides, asking them to restart talks.
MacKinnon had said that the talks were “progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved” — a sentiment echoed by several business groups across Canada.
In a joint letter, more than 100 organizations, including the Canadian Chamber of Commerce, Business Council of Canada and associations representing industries from automotive and fertilizer to retail and mining, urged the government to do whatever it takes to end the work stoppage.
“While we acknowledge efforts to continue with mediation, parties have not been able to come to a negotiated agreement,” the letter says. “So, the federal government must take decisive action, using every tool at its disposal to resolve this dispute and limit the damage caused by this disruption.
“We simply cannot afford to once again put Canadian businesses at risk, which in turn puts Canadian livelihoods at risk.”
In the meantime, the union says it has filed a complaint to the Canada Industrial Relations Board against the employers, alleging the association threatened to pull existing conditions out of the last contract in direct contact with its members.
“The BCMEA is trying to undermine the union by attempting to turn members against its democratically elected leadership and bargaining committee — despite the fact that the BCMEA knows full well we received a 96 per cent mandate to take job action if needed,” union president Frank Morena said in a statement.
The employers have responded by calling the complaint “another meritless claim,” adding the final offer to the union that includes a 19.2 per cent wage increase over a four-year term remains on the table.
“The final offer has been on the table for over a week and represents a fair and balanced proposal for employees, and if accepted would end this dispute,” the employers’ statement says. “The offer does not require any concessions from the union.”
The union says the offer does not address the key issue of staffing requirement at the terminals as the port introduces more automation to cargo loading and unloading, which could potentially require fewer workers to operate than older systems.
The Port of Vancouver is the largest in Canada and has seen a number of labour disruptions, including two instances involving the rail and grain storage sectors earlier this year.
A 13-day strike by another group of workers at the port last year resulted in the disruption of a significant amount of shipping and trade.
This report by The Canadian Press was first published Nov. 9, 2024.
The Royal Canadian Legion says a new partnership with e-commerce giant Amazon is helping boost its veterans’ fund, and will hopefully expand its donor base in the digital world.
Since the Oct. 25 launch of its Amazon.ca storefront, the legion says it has received nearly 10,000 orders for poppies.
Online shoppers can order lapel poppies on Amazon in exchange for donations or buy items such as “We Remember” lawn signs, Remembrance Day pins and other accessories, with all proceeds going to the legion’s Poppy Trust Fund for Canadian veterans and their families.
Nujma Bond, the legion’s national spokesperson, said the organization sees this move as keeping up with modern purchasing habits.
“As the world around us evolves we have been looking at different ways to distribute poppies and to make it easier for people to access them,” she said in an interview.
“This is definitely a way to reach a wider number of Canadians of all ages. And certainly younger Canadians are much more active on the web, on social media in general, so we’re also engaging in that way.”
Al Plume, a member of a legion branch in Trenton, Ont., said the online store can also help with outreach to veterans who are far from home.
“For veterans that are overseas and are away, (or) can’t get to a store they can order them online, it’s Amazon.” Plume said.
Plume spent 35 years in the military with the Royal Engineers, and retired eight years ago. He said making sure veterans are looked after is his passion.
“I’ve seen the struggles that our veterans have had with Veterans Affairs … and that’s why I got involved, with making sure that the people get to them and help the veterans with their paperwork.”
But the message about the Amazon storefront didn’t appear to reach all of the legion’s locations, with volunteers at Branch 179 on Vancouver’s Commercial Drive saying they hadn’t heard about the online push.
Holly Paddon, the branch’s poppy campaign co-ordinator and bartender, said the Amazon partnership never came up in meetings with other legion volunteers and officials.
“I work at the legion, I work with the Vancouver poppy office and I go to the meetings for the Vancouver poppy campaign — which includes all the legions in Vancouver — and not once has this been mentioned,” she said.
Paddon said the initiative is a great idea, but she would like to have known more about it.
The legion also sells a larger collection of items at poppystore.ca.
This report by The Canadian Press was first published Nov. 9, 2024.
