Two years ago, the federal and British Columbia governments formed an expert panel to examine the overheated housing market in British Columbia. The aim was to find ideas to improve housing supply and affordability.
One might assume that political leaders would be avid readers of a solution report for a bad housing market. And that would especially be the case, given the tornado that has ravaged homes across Canada over the past year, as a buying craze hit a supply shortage and pulled the Canadian Real Estate Association national average selling price 38 percent more.
Instead, the political reaction to the report – an immediate rejection of the most controversial recommendations – shows how difficult it is to tackle the housing crisis.
the six-member group: a senior business economist; the general manager of a private real estate developer; the CEO of the British Columbia Non-Profit Housing Association; a leader of the technology industry; a credit union economist; and a former NDP finance minister from British Columbia, who served as its chair. It was not a radical group, and the six were unanimous in their recommendations.
Some ideas were simple. The panel said the myriad of rules that restrict new housing – “regulating how much housing is built, where it is built and how fast” – need to be reconsidered. He also wants levels of government to work together and urged to redouble efforts to build affordable housing.
Two proposals, however, were too many. The panel cited significant tax breaks for homeowners like British Columbia homeowner subsidy, a partial property tax refund worth about $ 850 million per year, or the non-taxation of capital gains on the sale of primary residences, worth more than $ 6 billion per year. nationwide year. The panel proposed a review of the capital gains rule, which a Royal Bank of Canada economist also suggested in late March – and called for the homeowner’s subsidy to be phased out, with the money invested. in social housing.
British Columbia Finance Minister Selina Robinson and Federal Finance Minister Chrystia Freeland rejected the panel speech tax breaks within hours of the report’s release last week. The panel had foreseen it. Of course, it is more and more difficult to rent in Canada. Yes, the hope of young people to own a home is fading day by day. But in a country where around two-thirds of households own their homes, elected officials look after these voters.
“Homeowners, who stand to benefit from both the rising value of homes and the tax benefits available to them, also have considerable political influence,” the panel wrote. âPoliticians may be reluctant to take steps to dramatically increase housing supply and affordability or change tax policies that favor incumbent owners due to potential political backlash. This, in turn, exacerbates the housing shortage. “
The key here is not these big tax breaks. It is well known that such changes are a political virtual impossibility.
What is most important and disturbing is how this episode reveals the challenge of making a real difference in the future of housing in Canada.
Political leaders talk about doing great things. British Columbia presented a 30 point plan three years ago. Ottawa’s national housing plan is supposed to build 16,000 new affordable units one year over a decade. Sounds good, but it’s well below a peak of about 25,000 per year that was built half a century ago.
Meanwhile, too many current owners do not want their neighborhood to change and city councils are too often beholden to their interests. And so, a chronic housing shortage – Scotiabank said in May Canada has the fewest homes, adjusted for population, of any Group of Seven country – just getting worse.
The panel clearly saw the political puzzle. One of the most interesting elements of the report was the call to reduce the negative influence of city councils on housing. The panel, examining British Columbia, said, “It is up to the provincial government, which is ultimately responsible for local governments, to implement many of our most powerful recommendations.”
Canada has a fundamental long-term challenge: the population is increasing; housing does not have. Our political systems prevent us from building more. These are fundamental problems to be solved. There are lots of good ideas, as the BC report clearly indicates. What is lacking is the political courage to implement them.
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