Move Smartly Toronto Area Real Estate Market Report: December 2023 – Move Smartly

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While it is true that governments haven’t done all that could have been done to promote housing, what Poilievre isn’t saying is that the majority of the $1.3M he calls the “Gatekeeper Gap” is not government fees or delays, but rather the location value of the land in Vancouver. 

The authors of the CD Howe report he cites make a number of questionable assumptions, including assuming that land value should not exceed 25% of the sum of physical construction costs and land required to build a home. In areas where land costs exceed 25%, the authors conclude that this additional land cost is all due to policies restricting housing supply and has nothing to do with the demand for housing in that geographic location. 

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This is part of the growing field of YIMBY economics that aims to blame municipal housing regulations as the single cause of high house prices and land values. It is true that up to recently most of Canada’s cities have opposed new housing construction deemed to change the the character of existing neighbourhoods; only recently, Toronto and Vancouver have introduced major zoning changes to enable more housing to be built. But this doesn’t equal in $1.3M in extra cost.

But, though Poilievre makes little mention of it, the fact is that when it comes to demand for housing, location matters. Higher land values are often a product of higher demand for housing in specific geographic areas due to a number of factors, including the area’s socio-economic characteristics. When you have more people fighting for a fixed supply of land in a geographic area, we would expect land values in that area to be higher, independent of the region’s land-use policies. We would also expect areas with very high demand for housing to have more land-use regulations, such as greenbelt zoning, than areas with minimal demand. 

As for the other government fees and taxes Poilievre blames, it’s worth noting that federal GST/HST adds to the cost of new housing but he didn’t take the opportunity promise to eliminate all federal taxes on new housing construction (in October, the Trudeau government announced a GST/HST rebate on new rental building). 

What Pierre Would Do 

So what is Poilievre’s “common sense” plan to solve Canada’s housing crisis?

As we can see in his plan (see above), Poilievre says that the $4.5 billion that the federal government provides in infrastructure funding to municipalities each year should only be delivered to municipalities if the number of homes built in the city increases by 15% each year while also offering bonuses to municipalities that exceed this target.

He also insists that funds for federally-funded transit stations be delivered to municipalities after permitting the area for high-density housing around the station and after the housing is built and occupied. 

This plan has obvious problems.

Firstly, municipalities often need to invest in new infrastructure before homes can be built, including water, sewage and other essential services. Withholding infrastructure transfers isn’t going to help municipalities deliver more housing; it may, in fact, delay their ability to build more homes. 

As I wrote in my report last month, this is why municipalities are pushing back on the Ontario Ford government’s efforts to withhold funds in their own attempt to spur home-building.

The Ontario government created a $1.2B fund to offer a financial incentive to municipalities that reached at least 80% of their provincially assigned housing target. While many municipalities have argued they achieved their target based on the number of building permits they approved, the provincial government insists that their targets are based on housing starts (shovels in the ground) and not permits issued. 

But cities rightfully are arguing that they cannot control when builders decide to start construction. Many builders are delaying new housing projects due to higher costs and the uncertain economic environment. Under Poilievre’s housing plan, the federal government will withhold infrastructure transfers if builders decide to scale back their housing starts for economic reasons. 

As for requiring apartment buildings to be completely built around transit before funding such transit, this is a terrible approach to building great cities. By the time any such transit would be completed, all of those residents would have had to acquire cars or other means of transit to get anywhere, which is literally the opposite of how transit should be planned.

So Pierre’s housing plan is effectively a “do nothing plan.”

He wants his government to sit around, do nothing, and introduce no new federal housing policies while they wait for municipalities to solve this crisis independently. 

None of this, of course, mentions that Polievere’s solution also depends on the benevolence of builders to build during an uncertain economic environment.  

Pierre’s strong-man authoritarian leader tone, promising to punish municipalities for goals they don’t have complete control over, may sound great in a YouTube video, but something tells me it won’t lead to meaningful results. 

While it is true that Poilievre’s rival, Trudeau, has also used federal funding control as a way to encourage building at the municipal level, there are some key differences with the latter’s approach. In creating an additional $4B housing accelerator fund to encourage municipalities to change their local policies to enable more housing supply, the federal government has guided municipalities on the types of housing policy reforms they would like to see to qualify for federal transfer from the housing accelerator fund — see Federal Minister of Housing Sean Fraser’s recent demand to Toronto mayor, Olivia Chow, that Toronto improve their plan in order to access $500M in funds.

The reader can decide on their own which approach might actually lead to more housing being built. 

The Biggest Thing Pierre Doesn’t Say

The biggest problem with Poilievre’s housing plan is that he fails to identify the biggest driver of Canada’s boom in house prices, and that’s our booming population. 

For years, Canadians have been told that our housing crisis is strictly due to a “lack of supply” caused by municipal zoning restrictions.

However, this sentiment among economists and the public has shifted as many now see that Canada’s decision under the Trudeau government to triple its population growth rate when they should have known that housing supply couldn’t keep up is a primary contributor to our housing crisis. 

Since this is the one driver of our housing crisis that the federal government has direct control over, it’s very noteworthy that Poilievre doesn’t mention it or attack Trudeau on it at all. 

Poilievre may have very good political reasons for this omission as he campaigns towards becoming Canada’s next PM, but it doesn’t make him at all coherent when it comes to putting forward a plan that might actually address Canada’s housing crisis.

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