From the Fraser Institute

By Tegan Hill

Last Friday, less than a week before Christmas, the Smith government quietly released the final report from its Alberta Next Panel, which assessed Alberta’s role in Canada. Among other things, the panel recommends that the federal government transfer some of its tax revenue to provincial governments so they can assume more control over the delivery of provincial services. Based on Canada’s experience in the 1990s, this plan could deliver real benefits for Albertans and all Canadians.

Federations such as Canada typically work best when governments stick to their constitutional lanes. Indeed, one of the benefits of being a federalist country is that different levels of government assume responsibility for programs they’re best suited to deliver. For example, it’s logical that the federal government handle national defence, while provincial governments are typically best positioned to understand and address the unique health-care and education needs of their citizens.

But there’s currently a mismatch between the share of taxes the provinces collect and the cost of delivering provincial responsibilities (e.g. health care, education, childcare, and social services). As such, Ottawa uses transfers—including the Canada Health Transfer (CHT)—to financially support the provinces in their areas of responsibility. But these funds come with conditions.

Consider health care. To receive CHT payments from Ottawa, provinces must abide by the Canada Health Act, which effectively prevents the provinces from experimenting with new ways of delivering and financing health care—including policies that are successful in other universal health-care countries. Given Canada’s health-care system is one of the developed world’s most expensive universal systems, yet Canadians face some of the longest wait times for physicians and worst access to medical technology (e.g. MRIs) and hospital beds, these restrictions limit badly needed innovation and hurt patients.

To give the provinces more flexibility, the Alberta Next Panel suggests the federal government shift tax points (and transfer GST) to the provinces to better align provincial revenues with provincial responsibilities while eliminating “strings” attached to such federal transfers. In other words, Ottawa would transfer a portion of its tax revenues from the federal income tax and federal sales tax to the provincial government so they have funds to experiment with what works best for their citizens, without conditions on how that money can be used.

According to the Alberta Next Panel poll, at least in Alberta, a majority of citizens support this type of provincial autonomy in delivering provincial programs—and again, it’s paid off before.

In the 1990s, amid a fiscal crisis (greater in scale, but not dissimilar to the one Ottawa faces today), the federal government reduced welfare and social assistance transfers to the provinces while simultaneously removing most of the “strings” attached to these dollars. These reforms allowed the provinces to introduce work incentives, for example, which would have previously triggered a reduction in federal transfers. The change to federal transfers sparked a wave of reforms as the provinces experimented with new ways to improve their welfare programs, and ultimately led to significant innovation that reduced welfare dependency from a high of 3.1 million in 1994 to a low of 1.6 million in 2008, while also reducing government spending on social assistance.

The Smith government’s Alberta Next Panel wants the federal government to transfer some of its tax revenues to the provinces and reduce restrictions on provincial program delivery. As Canada’s experience in the 1990s shows, this could spur real innovation that ultimately improves services for Albertans and all Canadians.

Tegan Hill

Director, Alberta Policy, Fraser Institute

From the Fraser Institute

By Austin Thompson

The holidays are a time when families reconnect and share cherished traditions, hearty meals and, occasionally, heated debates. This year, housing policy might be a touchy subject at the holiday dinner table. Homebuilding has not kept pace with housing demand in Canada, causing a sharp decline in affordability. Efforts to accelerate homebuilding are also changing neighbourhoods, sometimes in ways that concern residents. Add in a generational divide in how Canadians have experienced the housing market, and it’s easy to see how friends and family can end up talking past one another on housing issues.

Some disagreement about housing policy is inevitable. But in the spirit of the holidays, we can keep the conversation charitable and productive by grounding it in shared facts, respecting one another’s housing choices, and acknowledging the trade-offs of neighbourhood change.

One way to avoid needless conflict is to start with a shared factual baseline about just how unaffordable housing is today—and how that compares to the past.

The reality is that today’s housing affordability challenges are severe, but not entirely unprecedented. Over the past decade, prices for typical homes have grown faster than ordinary families’ after-tax incomes in nearly every major city. At the pandemic-era peak, the mortgage burden for a typical purchase was the worst since the early 1980s. The housing market has cooled in some cities since then, but not enough to bring affordability back to pre-pandemic levels—when affordability was already strained.

These facts provide some useful context for the holiday dinner table. Today’s aspiring homebuyers aren’t wrong to notice how hard it has become to enter the market, and earlier generations aren’t exaggerating when they recall the shock of double-digit interest rates. Housing affordability crises have happened in the past, but they are not the norm. Living through a housing crisis is not, and should not be, a generational rite of passage. Canada has had long periods of relative housing affordability—that’s what we should all want to work towards.

Even when we agree on the facts about affordability, conflicts can flare up when we judge one another’s housing choices. Casual remarks like “Who would want to live in a shoebox like that?” or “Why would anyone pay that much for so little?” or “Why are you still renting at your age?” may be well-intentioned but they ignore the constraints and trade-offs that shape where and how people live.

A small townhome with no yard might seem unappealing to someone who already owns a single-detached house, but for a first-time homebuyer who prioritizes living closer to work or childcare, it might be the best option they can afford.

At first glance, a new condo or townhome might look “overpriced” compared with nearby older single-family homes that offer more space. But buyers must budget for the full cost of ownership, including heating bills, maintenance and renovations, which can make the financial math on some “overpriced” new homes pencil out.

And renting isn’t necessarily a sign that someone is falling behind. Many renters are intentionally keeping their options open: to pursue job opportunities in other cities, to sort out their romantic lives before committing to homeownership, or to invest their money outside of real estate.

This isn’t just a dinner-table issue. The belief that “no one wants to live like that” leads some to support policies restricting apartments, townhomes or purpose-built rentals on the premise that they’re inherently undesirable. A better approach is to set fair rules and let builders respond to what Canadian families choose for themselves—not what we think they should want.

The hardest housing conversations are about where new homes should go, and who gets a say as neighbourhoods change.

It’s natural for homeowners to feel uneasy about how their neighbourhoods might change as a consequence of housing redevelopment. But aspiring homebuyers are also right to be frustrated when local restrictions prevent the kinds of homes Canadian families want from being built in the places they want to live. The economics is clear—allowing more housing styles to be built in more places means greater options and lower prices for renters and homebuyers.

There’s no simple way to balance the competing views of existing residents and aspiring homebuyers. But the conversation becomes more productive if both sides recognize an unavoidable trade-off—resistance to neighbourhood change reliably restricts housing options and makes housing less affordable, but redevelopment can entail real downsides for existing residents.

Everyone wants better housing outcomes for Canadian families, but we won’t get them by talking past one another. If we bring empathy to the table and stay clear eyed about the trade-offs, we’ll collectively make better housing policy decisions—and have calmer holiday dinners.