Election season in Ontario is upon us again, with the hotly anticipated Provincial election happening on June 2. As was the case with the Federal election last fall, affordability – particularly with housing, is front-of-mind for voters.
Statistics Canada’s most recent stats show inflation up a staggering 6.8 percent in April. While this number is huge (and far beyond the general 2 percent target) anyone who has filled a gas tank, bought groceries or renewed their mortgage can tell you, every item is a lot more expensive. The cost of everyday necessities is really impacting household budgets!
Obviously, this is not sustainable, so the onus will be on governing parties at all levels to ease the cost of living. And, in particular, given the housing crisis continues, this election is critical because of the important role Ontario will play in regard to budget setting and policy creation to support more affordable housing. In fact, it’s even more essential that we, as voters, contemplate the complexities of policy in the context of the current market. As such, this is the first in a series that looks at policy, politics and housing today.
I Believe Housing Is A Right, Not A Privilege
As I wrote in my recent Dear Urbaneer post Does Canada Have A History Of Building Affordable Economical Housing? I believe housing in Canada should be a right and not a privilege, meaning that those who cannot afford to purchase a residence should be able to rent one within their financial means.
It warrants acknowledging there are many factors that contribute to how much it costs to build shelter and many forces at play which determine what the market value of shelter is in different locations across the country. And to understand all the nuances that contribute to this are complex and deeply rooted in land-use patterns, preferences and priorities; urban planning, policy and politics; the design, materiality and unsustainability of our built environment including our reliance on the car and fossil fuels; as well as our destructive attachment to status, power and greed including systemic racism, gender inequality and social inequity. If you want to see who the haves and have-nots are, look at where they live.
Did you read my posts from last fall’s Federal Election: What Toronto Real Estate Buyers & Sellers Should Watch For In The 2021 Federal Election and Affordable Housing Remains At The Forefront Of Federal Election Campaigns? They’ll give you a flavour of the issues at hand across the country.
With respect to this provincial election, this CBC article provides a good summary of the parties and their platforms: “Compare The Ontario Party Platforms For Yourself Here”. Below I’ll address housing specifically.
Housing Affordability: A Key Issue
You only have to take a cursory glance through the media to see dozens of headlines like this CTV ‘s “‘I’ll Never Be Able To Afford Property’: Housing Costs Key Issue For Ontario Voters” to realize the immense complexity of the issue of housing affordability – and the urgency for voters!
According to this report from Generation Squeeze, entitled, “Ontario Just Suffered The Worst Erosion Of Housing Affordability In The Last Half Century: Implications For The Ontario Election”, in the first two years of the pandemic, Ontario saw housing affordability take a nosedive; the like has not been seen in this country in 50 years! The gap between average income and housing prices is growing exponentially, made even wider by rising inflation.
This Global news article, “Housing Affordability In Ontario Has Eroded Faster Than Any Province Amid COVID-19: Report” cites the Generation Squeeze report and provides some context surrounding the level of unaffordability.
To summarize some of the numbers, in 2018, the average home price in Ontario was $606,917 (adjusted for inflation). By 2021, the average price had risen to $871,688, or 44 percent. Almost unbelievable, eh?
What this report also shines a light on is the duplicity of rising housing prices. As challenging as this eroding affordability is for those trying to get into the housing market or to move up the property ladder, for those currently invested in real estate this rapid price acceleration has meant substantial growth in wealth and growing of net worth.
To frame our housing affordability crisis in a historical context – in 1976, it took 5 years of full-time work to save a down payment for a home. Between 2019 & 2021, that figure rose to an astonishing 15.8 to 21.8 years of full-time work, just to save for the downpayment for a home, which is the greatest increase in 45 years.
This report predicts that, based on current incomes, average prices would need to fall to below $600,000 for the average person to manage a mortgage with 20 percent down. In Toronto, that number would need to be $750,000.
It’s a difficult balance to address both points of view, and a situation made even more complex now that shelter is regularly used as an investment; growing wealth through bricks & mortar wasn’t always a primary component of ‘Home’. (I’ve written about the slippery slope of the financialization of housing in this post: The Growing Trend Of Financial Landlords In Toronto Real Estate.) It’s been argued that politicians trying to maintain this aforementioned balance are simply reticent to reduce prices too much, as they don’t wish to alienate one side or the other of the voting public. Few are willing to get cut by this substantial double-edged sword – especially in election season.
Here is what we can expect from the various parties in regards to housing.
Many of the PC campaign promises were previewed in the budget they released at the end of April.
A key part of their housing platform is built on recommendations from a PC-appointed task force some months ago. They recommended the creation of 1.5 million new homes over a decade (incidentally, it is this number and these recommendations that all the parties have built their platforms with targeted housing supply).
To aid with making this recommendation a reality, legislation was passed just prior to the election call with measures meant to speed up approvals and associated processes to fast-track development. However, these measures fell short of actually changing municipal zoning rules to allow more housing to be built aside from single-family homes.
Zoning and various levels of government working in concert have been a well-known barrier to development. In my next post in this series, I am going to explore the role of each level of government, including some of the challenges faced in this collaborative process – and what should change to aid affordability.
Meanwhile, the PCs are hoping to be re-elected on their current record of housing creation, including about 100,000 housing starts last year, which is the highest since 1987. The PCs also aim to target foreign buyers with a hefty non-resident speculation tax, raising it to 20 percent.
The Liberals also are promising to create 1.5 million new homes over the next ten years. Additionally, they would work with municipalities to change zoning and increase density, allowing homes to be built up to three units and two storeys, as well as building secondary and laneway suites.
They would tax vacant properties, also in an effort to increase supply. Non-Canadians would be taxed at 5 percent of a home’s assessed value, while Canadians would be charged 2 percent. They estimate that would generate about $450 million a year in revenue, which could in turn be used to create new affordable housing.
The Ford government removed rent control a couple of years back, but the Liberals propose re-introducing it to prevent landlords from hiking rent. Landlords would only be able to increase rent at a set rate per year during a lease (usually between .5 and 3 percent).
They would also adopt a use-it-or-lose-it approach with developers, who sit on approved development projects, waiting for land value to increase, delaying supply entering the pipeline.
Building on the Federal Liberal’s ban on foreign ownership for two years, Provincial Liberals would work in concert with the Federal government to extend that to four years.
To aid first-time homebuyers, they would create a new Ontario Home Building Corporation. Homes built by this corporation would be available to first-time homebuyers only. Proceeds would then go back towards the creation of more affordable housing.
They also would regulate home inspection laws and make having an inspection done a legal right.
For cancelled housing projects, they would ensure buyers are refunded sooner, and that they would receive higher interest rates on lost deposits.
Click these to read “Ontario Liberal Housing Plan Puts Land Speculators On Notice” and “Ontario Liberal Leader Steven Del Duca Unveils Housing Strategy, Releases Fully Costed Election Platform” (The Star).
The Green Party
The Green party would like to reform the blind bidding process, which has been commonplace in hot markets across the province, where buyers are feverishly bidding against each other, raising prices swiftly.
They would support the creation of mixed-use properties and the creation of self-contained communities, as well as purpose-built rentals. They would also target inclusionary zoning and require that 20 percent of housing projects be devoted to affordable housing (above a certain size). They would support co-op housing with a seed fund. They would also support homeownership alternatives, like co-ownership and tiny homes. They would allow single-family homes to be divided into multiple dwellings in order to increase supply.
They would ensure that homeowners had a choice when it came to buying new home warranties, whereas right now, homeowners can only buy through Tarion. Similarly, they would change rules around property inspection, making it a requirement for the seller, at their expense.
For more about the Green Party housing platform, read this Toronto Star article “Ontario Green Party Promises To End Blind Bidding And Bring In A Vacant Home Tax” (the City of Toronto introduced a Vacant Home Tax earlier this year).
The Green Plan details its housing platform (and other initiatives) in full.
Like the Liberals and the Conservatives, the NDP has a goal of 1.5 million homes created within the next ten years They propose a mix of starter homes, purpose-built rentals and affordable housing units, with an intention to end exclusionary zoning, focusing on building supply in pedestrian and transit-friendly neighbourhoods.
The NDP government also wishes to re-introduce rent control, but they would like to take it further than the Liberals. They would like to prevent landlords from being able to raise rent between leases, thinking that would discourage renovictions, where landlords are turning out tenants at lease end so as to be able to raise the rent higher.
It’s no secret with high housing prices and disproportionate wages, accumulating a down payment for a home is a tall order. The NDP is proposing home equity loans to assist first-time homebuyers to purchase a home. Those with household incomes under $200,000 could access a loan up to 10 percent of a home’s purchase price.
Additionally, the NDP wants to establish a not-for-profit agency to build 2500 affordable and non-market rental homes called Housing Ontario.
Click here to read this CBC article “Ontario NDP Promises New Hospital, Construction Of 1.5 Million New Homes In 10 Years“.
The Path Ahead?
There are varying schools of thought on how policy can aid in bringing the housing market to a more affordable level. However, one thing is for sure – policy needs to be put into action with measurable steps and outcomes in order for it to be effective.
The report referred to from Generation Squeeze has some proposed solutions, including banning blind bidding wars and reducing provincial LTT – particularly for first-time homebuyers, which is an additional burden in an already pricey market.
This Globe and Mail article, “In The Ontario Election, 1.5 Million Ways To Fix Housing. Will It Happen?” brings forth some very salient points- in particular the penchant for politicians to make bold promises, but then to scale back on springing into action, either because of logistics and reality of the promises or of fear of alienating people. This happened with Ford’s recent legislation around fast-tracking development, which had originally been more aggressive, but met with significant opposition from municipalities and other stakeholders, so was scaled back in response. The idea here is that in reality, no matter who is in charge, that might be a challenge – and that the real solution to affordable housing may be in strong, bold cooperative programs by all three levels of government – or perhaps the federal and provincial governments simply transfer funds to municipalities to reduce duplication – so we can be done with policy rhetoric.
And, if I may say, what was not a political platform but what we really need is the political will to focus on Money Laundering –> as British Columbia has done with their Land Owner Transparency Registry.
As a realtor, having my finger on the pulse of the Toronto real estate market, including staying abreast of policy, politics and media is essential.
Here are some of my past posts that may be of interest:
Thanks for reading!
– Steve & The Urbaneer Team
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