OTTAWA — We have been warned before, and often. The
federal government and the Bank of Canada, in particular, have lectured us
about the evils of sky-high consumer debt and still-creeping house prices — and
the mounting threat to the economy — as rock-bottom interest rates inevitably
begin to rise.
Now, municipal leaders are weighing in — and in a big
way. They are calling on Ottawa to urgently address the issue of home
construction, in general, and what they see as a depleting stock of affordable
places to live.
“The federal government has a limited but critical role
to play, in partnership with other orders of government, in restoring balance
to our housing system,” said Claude Dauphin, the president of the Federation of
Canadian Municipalities [FCM], in letter to Prime Minister Stephen Harper.
“Federal actions, aligned with provincial, territorial,
and local initiatives, can be a catalyst for a stronger and more balanced
housing system, which will attract investment and create jobs, support new
growth, and increase labour mobility,” Mr. Dauphin said in the Oct. 1 letter.
“As it stands, for those who cannot afford to purchase a
home, the short supply of rental units is driving up rental costs and making it
hard to house workers in regions experiencing strong economic activity.”
The FCM is making its case ahead of the Conservative
government’s Speech from the Throne on Oct. 16. “Housing costs and, as the Bank
of Canada notes, household debt, are undermining Canadians personal financial
security, while putting our national economy at risk,” said Mr. Dauphin, the
mayor of the Montreal borough of Lachine, noting that mortgage debt held by
Canadians now stands at $1.1-trillion.
Canada Housing and Mortgage Corp., the Crown agency
responsible for insuring mortgages to approved buyers, uses a 30% threshold of
total household income going to housing. Anything above that, and consumers
could end up over their heads.
Dallas Alderson, director of policy and program at the Canadian
Housing and Renewal Association, said one-quarter of Canadian are over that
limit. Of those, 40% are renters, while 18.5% own their homes.
“So that’s the situation we have. In the last 15 years,
only 10% of housing starts have been for rental, even though 30% of us rent,”
she said.
“But a more shocking number is 20% of [private] renters
are paying half of their income for their rent, which is incredible because you
have very little left over.”
Mr. Dauphin, in an emailed statement to the Financial Post,
said municipalities “support the federal government’s commitment to jobs,
growth, and Canadians’ financial security.”
“For that reason, we believe that as the government sets
its priorities for the next two years, it should address the high-cost of housing
in Canada, the most urgent bread-and-butter issue facing Canadians today,” he
said.
“We’re not expecting the Speech from the Throne to
include specific new policy proposals, but it should recognize the strain
housing costs are putting on Canadians, and set the stage for concrete action
in at least two areas: protecting and expanding rental housing; and protecting
communities from the impact of expiring operating federal housing agreements.”
But Finn Poschmann, vice-president of research at the
think-tank C.D. Howe Institute, said Ottawa has “little jurisdiction and almost
no practical capacity to deliver housing.”
“Past attempts to do so, through CMHC for example, have
produced financial disasters for the people who participated and put CMHC in
grave financial situation.” he said.
“We wouldn’t want to see that again, nor the federal
mortgage agency deeply underwater and as similar U.S. agencies have been,
through the course of much more recent financial disasters.”
Still, those close to the ground see federal involvement
as crucial in heading off the very crisis Ottawa has been cautioning Canadians
about.
“I think FCM is certainly on the mark to say that housing
is really the key piece that may be under threat if all players don’t act to
ensure its stability,” said Ms. Alderson.
“In terms of the federal role, there are a variety of
incentives that the federal government could put in place to really push the
private sector towards the development of more rental housing,” she said.
“Whether that’s an instrument through CMHC or whether
that’s an instrument through the taxation system, there are a whole variety of
options available to the federal government but none are being utilized right
now.”
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