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Housing policy should focus on closing the demand-supply gap, not inducing demand or stifling supply

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From the Fraser Institute

FEDERAL REFORMS TO IMPROVE HOUSING AFFORDABILITY

BY JOSEF FILIPOWICZ AND STEVE LAFLEUR

Canada’s declining housing affordability reflects a large, worsening imbalance between housing demand and housing supply.

Few policy areas are gaining as much attention in Canada as housing. This is unsurprising, given that Canada has the largest gap between homes prices and incomes among G7 nations (OECD, 2023) and rents continue to rise in most cities (Statistics Canada, 2023a). As eroding housing affordability has expanded to more parts of Canada, demands for policy solutions have grown beyond local jurisdictions, pressuring federal decisionmakers to act.

First, this essay offers a diagnosis of the issue—a large, growing imbalance between housing demand and supply. Second, it discusses federal policies affecting housing demand, urging better coordination and restraint amid tight supply conditions. Third, it discusses the federal government’s less-direct—though still important—options to improve housing supply.

Guiding principles: do no more harm, and close the demand-supply gap

Canada’s declining housing affordability reflects a large, worsening imbalance between housing demand and housing supply. This is evident when comparing trends in population growth and housing completions. Figure 1 charts these two metrics between 1972 and 2022. In recent years, Canada’s population growth has accelerated, while the number of homes completed has declined relative to the 1970s. 1

Policy efforts should focus on closing the demand-supply gap. The federal government should first ensure that it is not exacerbating the problem, either by stoking demand or by stifling supply, and second by both reviewing all existing policies through a supply-demand lens while implementing tailored policies aimed at closing the demand-supply gap.

Demand-side considerations for federal housing policy

Though all levels of government influence both housing demand and supply, the federal government’s policy levers pertain more directly to demand. They do so in two important ways.

First, federal policy influences population growth. As Canada’s birth rate has declined, population growth has been driven primarily by immigration (including both permanent and temporary residents) (Statistics Canada, 2023c). Though provinces may influence immigration decisions, the federal government establishes annual targets (where applicable) and admission criteria (Filipowicz and Lafleur, 2023).

Second, the federal government influences households’ ability to pay for housing. Policies for home buyers including the First-Time Home Buyers’ Tax Credit and the First Home Savings Account, which, combined with the Home Buyers’ Plan, enable the accumulation of tax-free savings for a down payment. Federal policies for homeowners include the exemption from capital gains taxation on the sale of primary residences, loan insurance through the Canada Mortgage and Housing Corporation, and residential mortgage underwriting through the Office of the Superintendent of Financial Institutions. Combined, these policies influence the relative attractiveness of housing as an investment.

Without adequate supply, these policies result in higher prices, rather than greater affordability. The federal government should review all existing or proposed policies directly or indirectly impacting housing demand. Further, it should adopt the following two policy approaches:

• Stronger consideration of housing supply dynamics when determining short, medium and long-term immigration targets or visa issuance. For example, supply metrics (e.g. housing starts, completions, and rental vacancy rates) should help inform multi-year plans or criteria for permanent and non-permanent resident admissions.

• Refraining from introducing new demand-inducing subsidies, such as tax credits or subsidies to homebuyers and homeowners, while comprehensively reviewing the impact of existing subsidies.

Supply-side considerations for federal housing policy

Housing supply in Canada is influenced primarily by provincial and local governments. Decisions concerning land-use and growth planning—including for lands owned by the federal government—largely rest with these levels of government, meaning housing construction projects cannot be realized without first aligning with, and receiving approval from, local authorities. Federal policies aiming to grow the housing supply must account for this.

Federal influence on housing supply can be divided into four policy types. First are fiscal transfers. Every year the federal government transfers billions of dollars to municipalities to fund infrastructure. In some cases, funding is permanent and based on federal-provincial agreements.3 In other cases, funding is negotiated for specific projects.4

Second, the federal government also funds the development of non-market housing. Programs such as the National Co-Investment Fund and Rapid Housing Initiative offer low-interest or forgivable loans, and direct funding, respectively, to organizations building or acquiring non-market housing.

Third, federal tax policies and programs influence the financial feasibility of homebuilding. For example, federal sales and capital gains taxes apply differently to different housing types, such as condominiums, rental buildings and accessory dwelling units (e.g. basement or laneway suites).5
Further, federal programs such as the Rental Construction Financing Initiative and multi-unit mortgage loan insurance products influence project feasibility by providing rental builders with low-interest loans or reduced premiums.

Fourth, the federal government’s primary responsibility for immigration gives it significant influence over the mix of skills prioritized in application screening, affecting the construction sector’s ability to recruit workers. Indeed, the share of immigrants working in the construction sector was lower than that among Canada’s overall population in 2020 (BuildForce Canada, 2020), reflecting the longstanding selection preferences of federal immigration policy until more recent changes.6

The federal government should coordinate with local and provincial governments as it develops policies, avoiding the creation of additional barriers and duplication. Specifically, the following three approaches should inform federal efforts to improve housing supply:

• Tying all federal infrastructure funding to housing supply metrics such as housing stock growth, starts or completions, ensuring limited funds are directed to those regions facing the strongest growth pressures in a transparent fashion, while reducing administrative costs and jurisdictional overlap.

• Reviewing and reforming the tax treatment of all housing development, helping improve the feasibility of large- and small-scale projects Canada-wide.

• Further prioritizing skills related to homebuilding in immigration policies and eligibility criteria.

Conclusion

Faced with a widening gap between housing demand and supply, this essay focuses on the federal government’s influence on housing markets, offering five areas of policy action.

The most direct federal levers pertain to housing demand. Housing constraints should be weighed more heavily when setting immigration policy, including temporary immigration, and new demand-inducing policies such as homebuyer tax credits should be avoided, while existing policies should be reviewed.

Given the federal government’s less direct influence on housing supply, intergovernmental coordination is recommended. Limited transfer funding should follow local housing supply metrics, while the tax treatment of housing development could also be reformed, enabling a larger number of projects to be financially feasible.  Lastly, immigration policies should emphasize skills required to build more housing.

Notes
1 For more on the gap between population growth and housing completions, see Filipowicz (2023).
2 For a full list of incentives and rebates for homebuyers, see <https://www.cmhc-schl.gc.ca/consumers/home-buying/government-of-canada-programs-to-support-homebuyers>, as of February 5, 2023.
3 For example, the Canada Community-Building Fund (formerly the Gas Tax Fund) delivers approximately $2 billion annually to local governments.
It is governed by a series of federal-provincial agreements.
4 For example, the federal government has committed one-third of the capital funding required by the Surrey Langley SkyTrain. Similar agreements
are common for major transit infrastructure.
5 The federal government recently announced the removal of the goods and services tax on purpose-built rental housing, helping the feasibility
of this housing class. For more on the influence of federal taxation on rental housing, see Canadian Home Builders’ Association (2016).
6 Immigration, Refugees and Citizenship Canada changed screening processes in mid-2023, favouring trade occupations, among others. The full effects of these changes will become apparent with time.
Sources for Figure 1
Statistics Canada, 2023a, table: 17-10-0009-01; Statistics Canada, 2023b, table: 34-10-0126-01.
References
BuildForce Canada (2020). Immigration Trends in the Canadian Construction Sector. <https://www.buildforce.ca/system/files/documents/Immigration_trends_Canadian_construction_sector.pdf> as of September 13, 2023.
Canadian Home Builders’ Association (2016). Encouraging Construction and Retention of Purpose-Built Rental Housing in Canada: Analysis of Federal Tax Policy Options. <https://www.evergreen.ca/downloads/pdfs/HousingActionLab/HAL_EncouragingConstructionAndRetention_FINAL.pdf> as of September 13, 2023.
Filipowicz (2023). Canada’s Growing Housing Gap: Comparing Population Growth and Housing Completions in Canada, 1972–2022.
Fraser Institute. <https://www.fraserinstitute.org/sites/default/files/canadas-growing-housing-gap-1972-2022.pdf>, as of February
5, 2024.
Filipowicz, Josef and Steve Lafleur (2023a). Getting Our Houses in Order: How a Lack of Intergovernmental Policy Coordination
Undermines Housing Affordability in Canada. Macdonald-Laurier Institute. <https://macdonaldlaurier.ca/getting-our-houses-in-order-how-a-lack-of-intergovernmental-policy-coordination-undermines-housing-affordability-in-canada/>, as of February 5, 2024.
Immigration, Refugees and Citizenship Canada (2023). Express Entry Rounds of Invitations: Category-based Selection. <https://www.
canada.ca/en/immigration-refugees-citizenship/services/immigrate-canada/express-entry/submit-profile/rounds-invitations/category-based-selection.html>, as of September 15, 2023.
International Monetary Fund (2023). Report for the 2023 Article IV Consultation. [or Country Report: Canada]. <https://www.imf.
org/en/Publications/CR/Issues/2023/07/27/Canada-2023-Article-IV-Consultation-Press-Release-and-Staff-Report-537072> as of
September 13, 2023.
Organisation for Economic Cooperation and Development [OECD]. 2023. Housing Prices (indicator). DOI: 10.1787/63008438.
OECD. <https://data.oecd.org/price/housing-prices.htm>, as of February 5, 2023.
Statistics Canada (2023a). Table 34-10-0133-01. Canada Mortgage and Housing Corporation, average rents for areas with a population of 10,000 and over. <https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=3410013301>, as of February 5, 2023.
Statistics Canada (2023b). Table 34-10-0127-01. Canada Mortgage and Housing Corporation, vacancy rates, apartment structures of six units and over, privately initiated in census metropolitan areas. <https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3410012701>, as of February 5, 2024.
Statistics Canada (2023c). Table 17-10-0008-01. Estimates of the components of demographic growth, annual. <https://www150.
statcan.gc.ca/t1/tbl1/en/tv.action?pid=1710000801>, as of March 2, 2023.

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Ottawa foresees a future of despair for Canadians. And shrugs

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This article supplied by Troy Media.

Troy Media By Lee Harding

A government report envisions Canadians foraging for food by 2040. Ottawa offers no solutions, just management of national decline

An obscure but disturbing federal report suggests Canadians could be foraging for food on public lands by 2040.

Policy Horizons Canada released the dire forecast on Jan. 7, 2025, in a report entitled Future Lives: Social Mobility in Question. It went largely unnoticed at the time, but its contents remain deeply concerning and worth closer examination.

Policy Horizons Canada is a little-known federal think-tank within the public service that produces long-term strategic foresight to guide government decision-making. Though not a household name, its projections can quietly shape policies at the highest levels. It  describes itself as the government’s “centre of excellence in foresight,” designed to “empower the Government of Canada with a future-oriented mindset and outlook to strengthen decision making.” Its current head is Kristel Van der Elst, former head of strategic foresight at the World Economic Forum.

The report warns that the “powerful promise” that anyone can get an education, work hard, buy property and climb the social and economic ladder is slipping away. Instead of a temporary setback, the authors argue, downward mobility could become the norm. They liken Canada’s future to a board game with “more snakes than ladders.”

“In 2040, upward social mobility is almost unheard of in Canada,” the report states. “Hardly anyone believes that they can build a better life for themselves, or their children, through their own efforts. However, many worry about sliding down the social order.”

While these scenarios aren’t firm predictions, foresight reports like this are intended to outline plausible futures. The fact that federal bureaucrats see this as realistic is revealing—and troubling.

Post-secondary education, the report suggests, will lose its appeal. Rising costs, slow adaptation to labour market needs, long program durations and poor job prospects will push many away. It predicts that people will attend university more to join the “elite” than to find employment.

Home ownership will be out of reach for most, and inequality between those who own property and those who don’t will drive “social, economic, and political  conflict.” Inheritance becomes the only reliable path to prosperity, while a new aristocracy begins to look down on the rest.

The gap between what youth are told to want and what they can realistically expect will widen, fuelling frustration and apathy. As automation and artificial intelligence expand, many traditional white-collar jobs will be replaced by machines or software. “Most people (will) rely on gig work and side hustles to meet their basic needs,” the report warns.

This leads to one of the darkest predictions: “People may start to hunt, fish, and forage on public lands and waterways without reference to regulations. Small scale agriculture could increase.”

The authors don’t propose solutions. Instead, they ask: “What actions could be taken now to maximize opportunities and lessen the challenges related to reduced and/or downward social mobility in the future?”

That question should concern us. Policymakers aren’t being asked how to prevent the collapse of social and economic mobility but how to manage its
fallout. Are those envisioning Canada’s future more interested in engineering a controlled implosion than fostering hope and opportunity?

Yes, artificial intelligence will bring challenges and change. But there is no excuse for despair in a country as rich in natural resources as Canada. Besides, the 2021 income data used in the report predates even the release of the first version of ChatGPT.

If policymakers are serious about restoring upward mobility, they must prioritize Canada’s resource economy. Ports, pipelines, oil and gas development, and mining are essential infrastructure for prosperity. When these sectors are strangled by overregulation, investment dries up—and so do jobs. The oil patch  remains one of the fastest paths from poverty to wealth. Entry-level jobs in the field require training and safety courses, not four-year degrees.

Similarly, post-secondary education doesn’t need to be as expensive or time consuming as it is now. We should return to models where nurses could earn certification in two years instead of being funnelled into extended university programs. And if governments required universities to wind down defined benefit pension plans, tuition would fall fast.

Unfortunately, there’s a real risk that policymakers will use reports like this to justify more wealth-killing socialism. A home equity tax, for example, might be pitched to avoid future tensions between renters and homeowners. Such a tax would require Canadians to pay an annual levy based on the increased value of their home even if they haven’t sold it. These policies don’t build wealth—they punish it, offering temporary relief in place of lasting progress.

Unless we choose a more sensible path, the controlled demolition of Canada will continue.

Lee Harding is a research fellow for the Frontier Centre for Public Policy.

Troy Media empowers Canadian community news outlets by providing independent, insightful analysis and commentary. Our mission is to support local media in helping Canadians stay informed and engaged by delivering reliable content that strengthens community connections and deepens understanding across the country

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Economy

Canada’s Energy Wealth Is Bleeding South

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From the Frontier Centre for Public Policy

By Marco Navarro-Genie

Without infrastructure, Canada is losing billions while the U.S. cashes in on our oil and gas

Canada’s energy wealth is stuck in traffic, and our American neighbours are cashing in. It’s worse than that. Canada is bleeding millions of dollars daily because it lacks the infrastructure to export its natural resources efficiently.

While our oil and gas continue to flow—mainly to the United States—provinces like Alberta and British Columbia are forced to sell at steep discounts. This isn’t just an economic inefficiency; it’s a structural failure of national policy. The beneficiaries? American businesses and their governments which pocket the profits and tax revenues that should be circulating through the Canadian economy. This is no way to achieve economic sovereignty for Canada.

With U.S. interests reaping the rewards, this should have been a central talking point when Prime Minister Carney met with President Trump earlier this month.

Ottawa often offers the recent completion of the Trans Mountain Expansion (TMX) pipeline as an example of federal support for the energy sector. But such claims are misleading. Kinder Morgan, a private enterprise, had initially planned to build the extension without a penny from taxpayers. It withdrew only after being crippled by federal regulatory delays and political uncertainty.

Ottawa stepped in not as a benevolent saviour to help Albertans, but to prevent lawsuits and save face—ultimately overpaying for the pipeline and watching construction costs balloon to nearly six times the original estimate.

To now declare this bungled project a “gift” to Alberta, as a recent op-ed in the Toronto Star did, is not only tone-deaf: it’s an insult. It ignores the fact that Alberta’s taxpayers helped finance the very project Ottawa botched. It also reveals an astonishing lack of understanding of the historical, economic and political dynamics at play between Ottawa and Western Canada.

The tragedy is that TMX, despite its importance, is insufficient. Our infrastructure bottlenecks remain. With each passing day, Canada forfeits wealth that could fund essential improvements in health care, education and national defence.

According to the Frontier Centre for Public Policy, which has developed a real-time tracker to monitor these losses, the price differential between what we could earn on global markets versus what we settle for domestically adds up to $26.5 billion annually.

Ottawa’s reluctance to greenlight new infrastructure is a primary cause of this problem. Ironically, the losses from this reluctance in a single year would be enough to pay for another TMX, mismanaged or not. The solution lies in a national commitment to building utility corridors: designated routes that facilitate the movement of energy, goods and services unhindered across provincial boundaries.

Carney’s recent promise to remove all interprovincial trade barriers by July 1 is a nice soundbite. But unless it includes meaningful infrastructure commitments, it is bound to fail like every other rhetorical flourish before it.

Canadians should be rightly skeptical. After all, what Ottawa has failed to achieve in the 157 years since Confederation is unlikely to be accomplished in the next 60 days.

The political math doesn’t help either. The Bloc Québécois holds the balance of power in the 45th Parliament, and its obstructionist stance on national pipeline development ensures the advent of more gridlock, not less. The federal government continues to uphold Bill C-69—dubbed the “no-pipelines bill”—further entrenching the status quo.

Meanwhile, Canada remains in the absurd position of relying on U.S. infrastructure to transport oil from the West to Ontario and Quebec. This undermines our economic independence, energy security and national sovereignty. No amount of “elbows up” will correct this enormous gap.

If the prime minister is serious about transforming Canada’s economic landscape and making the country strong, he must bypass the Bloc by cooperating with the Official Opposition. A grand bargain focused on utility corridors, interprovincial infrastructure and national trade efficiency would serve Alberta, Saskatchewan, and every Canadian who depends on a strong and self-reliant economy.

The stakes are high. We need a more productive country to face challenges within Canada and from abroad. Billions in lost revenue could fund new hospitals, more schools and better military readiness.

Instead, along with the limited exports of oil and gas, we’re exporting great opportunities to middlemen—and greater economic strength—south of the border.

The path forward is clear. A strong, self-reliant Canada needs infrastructure. It needs corridors. It needs leadership.

Marco Navarro-Genie is the vice president of research at the Frontier Centre for Public Policy. He is coauthor, with Barry Cooper, of Canada’s COVID: The Story of a Pandemic Moral Panic (2023).

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