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Is this a “can of worms?”

Is it a “ticking time bomb?”

Would “powder keg” be more appropriate to describe the situation?

Or may we use “recipe for disaster?”

Are we simply waiting for a “boiling point?”

Or do we need the situation to “boil over?”

Is now the time to mention “Pandora’s Box?” or do we save that for another day?

I thought long and hard about the title of today’s post, the manner in which I wanted to get the point across, and then exactly what the thesis or hypothesis would be.

And the truth is: I’m still not sure.

This might be a case of, “I’ll lay it out for ya’ll to play it out,” but do any of us really know what caused the housing crisis, who is to blame, or how to fix it?

Last week, Prime Minister Justin Trudeau made a comment that he probably didn’t think was going to cause shockwaves, and yet it did.  I’m the last defender of Mr. Trudeau, trust me on this, but I will say that his comment might have been too off-the-cuff or taken out of context, or the very least, it was cut from the overall theme of what he was saying.

What did he say?

This:

“I’ll be blunt as well — housing isn’t a primary federal responsibility. It’s not something that we have direct carriage of.”

This may very well prove to be Mr. Trudeau’s undoing, and while many spent last week focusing on Mr. Trudeau’s marriage and personal life, which I think is absolutely nobody’s business, I do think that we’re at a critical point in Mr. Trudeau’s tenure.

I applaud Mr. Trudeau for being truthful, which is something I wish politicians did more of.  But we’ve grown so accustomed to politicians lying and telling us what we want to hear that the whole country seemed shocked by what he said.

“Not our job.”

That’s how most people took this.

“Not our problem.”

That’s the extension for those who want to play with words.

It’s worth noting that Mr. Trudeau continued, “”But it is something that we can and must help with,” but few chose to read past the headlines, I’m sure.

Last week was a bad one for the Prime Minister but I think this was a long time coming.  I believe that based on the public opinion that increased Immigration is putting a strain on housing prices, eventually, Mr. Trudeau was going to throw his arms up and say something.

I just didn’t expect him to say “It’s not our responsibility.”

Even before the media ran with his “not our responsibility” line, we started to see Mr. Trudeau try to heap the blame on others:

“Justin Trudeau Shifts Some Of The Blame For Eye-Popping Housing Costs”
Financial Post
July 31st, 2023

My good pal, John Pasalis, had some great quotes in the article:

The remarks show the government “is giving up on solving the housing crisis it created,” said John Pasalis, president of Toronto-based real estate brokerage company Realosophy Realty.

“Our federal government is supercharging the demand for housing by rapidly increasing Canada’s population growth rate without any regard for where people will live and is now blaming the provinces and cities for not doing the impossible — tripling the number of homes they build each year,” Pasalis said.

Opinion or fact?

John, I love this side of you.  Please let us see more of it.

One day later, we started to see the headlines about “responsibility,” or rather lack thereof:

“As Housing Prices Spoke, Trudeau Now Says It’s Not A ‘Federal Responsibility'”
National Post
August 1st, 2023

The sub-heading read:

Trudeau made the comments while standing behind a lectern affixed with a sign reading ‘building more homes faster’

I mean, I know that different newspapers take different views of current events, but the Post wasn’t exactly out of line to point out the irony, right?

The article does point out that Mr. Trudeau came to office with promises of “affordable housing” and has now completely changed his tune.

The Liberals’ 2015 campaign platform promised “affordable housing for Canadians.” “We have a plan to make housing more affordable for those who need it most – seniors, persons with disabilities, lower-income families, and Canadians working hard to join the middle class,” Trudeau said at the time.

But home prices have soared since 2015:

In 2015, the average Canadian home price stood at $413,000. Now, according to the latest estimates from the Canadian Real Estate Association, average home prices have risen to $702,409 — an increase of about 70 per cent.

Shelter costs have been even worse for renters. In 2015, the median rent across Canada’s 35 largest urban centres stood at $966 per month. As of the latest figures from Rentals.ca, that figure has almost doubled to a median rent of $1,811 per month for a one-bedroom.

I was very surprised to see CBC News, which has recently become a government mouthpiece, pen this piece:

“Trudeau Says Feds Aren’t Primarily Responsible For Housing, But How Responsible Are They?”
CBC News
August 2nd, 2023

This article sought opinions from experts on what the federal government’s role should or even could be:

The Constitution or legislation sometimes explicitly states which level of government is responsible for a particular issue, but this is not the case with housing.

“If you read the Constitution, the word housing doesn’t appear in there,” said Steve Pomeroy, an industry professor and executive advisor at the Canadian Housing Evidence Collaborative at McMaster University.

“However, jurisprudence has generally interpreted the Constitution that matters of local things are seen as being provincial jurisdiction. So the legal interpretation of the Constitution in a very strict review would allocate responsibility for housing to the provinces.”

But the federal government controls many institutions and areas of policy which affect the price and availability of housing in Canada, Pomeroy said, such as federal fiscal policy and bank regulation.

The Canada Mortgage and Housing Corporation (CMHC), which is responsible for implementing Canada’s National Housing Act, is a federal crown corporation. CMHC says it “exists for a single reason: to make housing affordable for everyone in Canada,” according to its website. The organization provides mortgage insurance, sets rules for who can qualify for mortgage insurance, collects data about housing in Canada, and more.

Later in the article, we received a sharper critique of the federal government’s initiatives:

The government values the National Housing Strategy at more than $82 billion, though some of that money is loans rather than new spending.

But Pomeroy said the federal government needs to be held responsible for flaws in its approach to housing.

“To be perfectly frank, I think they haven’t done a very good job, even though they’ve started spending a lot of money,” he said.

“The way they’ve designed initiatives, they’ve been very cumbersome.”

Another scathing headline appeared on the very same day:

“Soaring Housing Costs Could Spell ‘Disastrous’ Political Consequences For Trudeau”
Financial Post
August 2nd, 2023

But again, I would ask: is it the “fault” of the federal government?  Or are we just suggesting that people are frustrated with housing prices and will clamour for a change in government, regardless?

From the article:

Trudeau has played defence on the issue this summer, appointing a new housing minister last week and shifting some of the blame to other levels of government on Monday. But with his party already sinking in recent polls, housing has become a serious vulnerability for Trudeau.

“Failure to be seen as doing enough on housing could be politically disastrous for the Liberals,” said David Coletto, chief executive of polling firm Abacus Data.

Again, as much as I dislike this government, it seems unfair to simply suggest that perception is enough to cast blame.

Causation?

No.

Perception.

But before Mr. Trudeau gave us that damning quote last week and before the media ran with it, I read a great column in the Globe & Mail by John Ibbitson, with a very fair and very important headline:

“The Liberals Must Fix The Housing Crisis Before It Undermines Support For Immigration”
The Globe & Mail
July 31st, 2023

Exactly.

None of us really know if immigration is a cause of higher home prices.  It might seem that way, and I personally would conclude, “It doesn’t help,” but I fear that the more house prices rise, and the more immigration spirals, a large percentage of the population will cast “blame” on new Canadians.

Here’s another opinion piece in the Globe:

“Canada’s Economy Is Stuck In A Rut.  High Immigration Isn’t The Cause – Or The Answer”
The Globe & Mail
July 24th, 2023

The article surmises that plans to use the various immigration streams to raise GDP per capita are being undermined by too heavy a focus on filling low-wage, low-skill jobs.

The author, Tony Keller, followed up with this piece the following week:

“It’s Time For Canada To Take Its Foot Off The Immigration Gas Pedal”
The Globe & Mail
July 27th, 2023

From the article:

The Liberals have a habit of crafting marketing strategies before policies, and then having policies become hostage to the talking points. Immigration is such a case. We’re about to find out whether the Liberals can make a course correction, or whether they’ll double down on the polarizing talking points, attacking suggestions for reform as so much xenophobia.

The Liberals have raised Canada’s immigration targets, year after year, while also making it ever easier for businesses to recruit low-wage, not-so-temporary temporary foreign workers, and schools to enroll hundreds of thousands of overseas students – many of whom seek student visas in part for the chance to become low-wage, not-so-temporary temporary foreign workers.

One of the negative consequences is that the national housing squeeze has been made worse, with a big jump in postpandemic arrivals pushing high prices higher and low vacancy rates lower. It’s not political. It’s just arithmetic.

The Liberals could fix things – not by stopping immigration but by scaling it back, and making it more targeted to highly skilled economic immigrants. The latter is supposed to be the core mission of our immigration system. Returning to that common-sense approach would benefit Canadians and the economy.

But is immigration the number-one cause of the increase in housing prices?

Or is it simply a case of “it’s not going to make it any better?”

Because there’s a big difference between being the cause of the housing crisis and being something that exacerbates an existing issue.

Here’s a report from the good folks at TD Economics which explains that continued levels of record immigration could actually DOUBLE the gap in Canada’s housing supply:

“Balancing Canada’s Pop In Population”
TD Economics
July 26th, 2023

This chart speaks volumes:

I would suggest that unless we overlay a second line that represents “housing completions,” and that line traces the green line exactly, then we’re going to have a problem moving forward.

Meanwhile, we’re seeing headlines like this:

“More Newcomers Needed To Stem Construction Labour Shortage And Build More Housing, RBC Says”
Toronto Star
August 2nd, 2023

Does this contradict everything being said about lowering immigration targets?

No.  Not at all.

And this is exactly the point.

I don’t know that there’s anybody in the country that believes we need a 0.00% immigration target, but rather it’s the process of accepting immigrants and non-permanent residents that’s important, as well as who they are, and the skills they possess.

Circling back to Tony Keller’s article, consider just how many low-wage, low-skill, “not-so-temporary” temporary foreign workers the country brings in, not to mention all the foreign students who schools drool over because foreign students pay multiples of what domestic students would pay.

The country desperately needs newcomers who are skilled in trades and can work in construction, not to mention doctors…

So while a headline like the one above, suggesting “more newcomers needed” might seem to contradict a headline that reads, “Canada needs to take its foot off the immigration gas pedal,” it doesn’t.  Not if you understand the immigration process and how it works, or more importantly, how it’s supposed to work.

I fear that “immigration” is going to be the new housing boogeyman.

Once upon a time, real estate agents were to blame for the housing crisis.  This new form of misrepresentation called “staging” was called out, as well as “offer nights” and “bully offers,” not to mention blind bidding.

Remember when foreign buyers were the culprit?  How much time did we spend on that?  How much time are we still spending on that, considering this became the boogeyman somewhere around 2015, and then in 2022, we rolled out a two-year ban on foreign buyers.

What about investors?  Aren’t they to blame for buying up all our houses and condos and having the audacity to commoditize something that has been a commodity for a century?

And now, it’s immigrants.

I can’t imagine how much fuel this will give to the extremists.

Immigration is likely exacerbating the housing crisis or is most certainly going to in the next few years, but it’s not the cause of the housing crisis, and I hope people recognize this.

There are many, many causes, and this isn’t something that happened overnight.  I’ve been talking about supply issues on TRB for a decade, and my issues with the absurdly negative effect that municipalities have on housing supply go back even further.

I also don’t think, and I don’t like defending the man, that Justin Trudeau isn’t personally responsible for the current housing crisis.

His policies have made it worse but he didn’t start this.  He didn’t cause it.

To blame Justin Trudeau simply gives us an enemy for today, but it does nothing to solve the problem tomorrow.

Mr. Trudeau will be gone by the next election, either as his party is defeated, or he is replaced within his own party.  But without focusing on the real causes of the housing crisis and real solutions, it’s simply going to be “next man up” and the country will fall further and further behind…

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Epilogue:

I wrote this post last week, trying to get ahead for the next couple of weeks of summer.

Wouldn’t you know it, this article appeared over the long weekend:

“Canada Has No Plans To Decrease Immigration Amid Housing Criticism, New Minister Says”
Financial Post
August 4th, 2023

Oh, now this one too:

“Amid Canada’s Housing Crisis, Immigration Needs To Be Slower, More Focused”
The Globe & Mail
August 9th, 2023

And don’t forget Mr. Rosenberg:

“Immigration Could Be Good For Housing Affordability In The Long Run”
The Financial Post
August 9th, 2023

I’m really starting to wish I had posted this blog last week so I could have looked like I got out ahead of all this!

The post Immigration, Housing Prices, & “Blame” appeared first on Toronto Realty Blog.