Long way home: Blamed for affordability crisis, Liberals look to pivot on housing

2023/08/15 Leave a comment

But a real pivot has to include both immigration and housing….

Chris Burke and his fiancée have been less than a year away from buying their first home for the past three years.

Saving for a down payment was the first challenge. Now, rising interest rates have kicked home ownership down the road again, stalling the couple’s plans to get married and have children.

“Any gains we make towards purchasing a house, we’re watching the goalposts move further and further away,” the 31-year-old Ottawa resident said.

Feeling “stuck,” as Burke put it, is a sentiment shared by many young Canadians who are increasingly pessimistic about their home ownership prospects.

For the federal Liberals, the growing discontent with the state of the housing market is becoming a political threat.

“I’m a former Liberal voter,” Burke said. “I certainly wouldn’t be voting for them this time around.”

Experts say the housing crisis poses a great risk to the incumbent government in the next election if it doesn’t take drastic action soon.

“This has become probably the most important both economic and political problem facing the country right now,” said Tyler Meredith, a former head of economic strategy and planning for Finance Minister Chrystia Freeland.

“And especially given the significant emphasis the government has put on immigration and the relationship between immigration and the housing market, there is a need to do more.”

Conservative Leader Pierre Poilievre has taken direct aim at the Liberals for the state of the housing market, highlighting the dramatic increases in home prices, rents and even interest rates.

According to the Canadian Real Estate Association, the national average price of a home sold was $709,000 in June 2023, up from $455,000 in Oct. 2015, when the Liberals first came to power.

And the cost of getting a mortgage has soared, following a series of aggressive interest rate increases by the Bank of Canada in response to rising inflation following the COVID-19 pandemic.

Rent prices have also skyrocketed, with some cities seeing double-digit increases over the last year.

Trudeau has tried to deflect for the housing crisis, recently saying there are limits to what the federal government can do.

“I’ll be blunt as well: housing isn’t a primary federal responsibility,” Trudeau said during a housing announcement in Hamilton on July 31.

“It’s not something we have direct carriage of. But it is something that we can and must help with.”

His remarks were quickly blasted by Poilievre, who reminded people of earlier promises Trudeau had made on housing.

“(Trudeau) held a news conference … to tell you all he’s not responsible for housing. That’s funny, because eight years ago, he promised he was gonna lower housing costs,” Poilievre said in a news conference the next day.

Most experts agree that Ottawa isn’t solely responsible for the problem. But many say the federal government could still be doing more to alleviate the shortage of housing at the root of the affordability crunch.

The Canada Mortgage Housing Corp., the national housing agency, warned last year that the country needs to build 5.8 million homes by 2030 to restore affordability.

If the current pace of building continues, then only 2.3 million homes will have been added to the housing stock by then.

There are several things experts say the federal government could be doing, such as better calibrating its immigration policy with housing and reforming tax laws to incentivize rental developments. It could also push local governments to get housing built faster.

The federal government has been hearing from stakeholders and housing experts on these potential solutions, as rumblings grow about a focus on housing in the coming fall economic statement and next year’s budget.

A senior government official who spoke on the condition of anonymity so they could discuss matters not yet made public, says the Liberals plan to take steps over the next year to get other levels of government, the private sector and the not-for-profit sector to build more homes.

Trudeau’s recent cabinet shuffle might be an early sign that the federal government plans to prioritize housing. The prime minister appointed one of the stronger communicators and a rising star on the Liberal bench, Sean Fraser, to take on housing and infrastructure as one, amalgamated file.

“The prime minister said something to the effect of, ‘I’ve got a big job for you to do,'” Fraser said in an interview.

Fraser said he hopes to help restore a housing market closer to the one he grew up with in small-town Nova Scotia: one where having a job was enough to buy a home.

“It might take a bit of time for us to solve the housing challenges that are before us,” he said. “But man, is it a challenge we’re solving.”

That challenge includes overcoming jurisdictional issues. Many of the policy levers that could help spur more housing development are at the provincial and municipal levels of government.

Urban planning, zoning laws and red tape are the purview of local governments, which have decision-making powers that can help or hinder housing development.

Ben Dachis, associate vice-president of public affairs at the C.D. Howe Institute, says the predicament the Liberals find themselves in speaks to the “insidious nature of consistent federal overreach.”

“The cautionary tale is that the federal government needs to stick with jurisdiction,” Dachis said.

But housing expert Carolyn Whitzman has a different take. The University of Ottawa adjunct professor says the federal government can’t turn its back on Canadians in the middle a crisis.

“The federal government: it’s where the buck stops,” Whitzman said.

“If housing and climate change are the crises that they’re certainly treated (as), the federal government is going to have to put on its big kid pants and actually deal with it.”

Source: Long way home: Blamed for affordability crisis, Liberals look to pivot on housing

Related article: Canada ‘absolutely’ can’t build more houses without more immigrants, minister says

Canada’s housing crisis “absolutely cannot” be solved without the aid of new immigrants who bring their skills here, Immigration Minister Marc Miller told reporters on Friday

“The federal government is making housing more affordable and bringing in the skilled workers required to build more homes,” Miller said in Montreal.

“Without those skilled workers coming from outside Canada, we absolutely cannot build the homes and meet the demand that exists currently today.”

Miller was asked by reporters if he was considering slashing Canada’s immigration targets, which are currently at historic highs, in response to a recent Bank of Canada report that new immigrants are adding to housing demand.

The minister said he was not.

“People coming to this country are resourceful. When they bring capital, they are able to acquire houses,” he said.

“If people are asking us to slash, what does that mean? Does that mean slashing the skilled workers that we need to actually build those houses? Slash family reunification, which can be devastating for the mental health and well-being of the families that are already here?”

Canada aims to welcome 451,000 new immigrants in 2024.

By 2025, the number is expected to go up to 500,000 new immigrants in one year.

Miller said around 60 per cent of new immigrants to Canada are economic migrants, many of whom are the kind of skilled workers needed to build more housing. Family reunification visas account for around 20 per cent of those migrating. The rest, he said, are refugees and asylum seekers.

“We have a humanitarian duty towards people that are fleeing war and persecution,” Miller said.

Last week, a spokesperson from Miller’s office told Global News that fulfilling Canada’s labour shortages is one of his key priorities, and a key goal of the government’s immigration targets.

“Strategies like Express Entry, and the historic Immigration Levels Plan, which is largely made up of economic migrants, are a great asset to our nation as they will directly help combat the ongoing labour shortage. This is especially true when it comes to the housing sector,” Bahoz Dara Aziz, press secretary to the immigration minister, told Global News.

“With provinces like Ontario needing 100,000 workers to meet their housing demands, it is clear that immigration will play a strong role in creating more homes for Canadians.”

The federal government increased its immigration targets in November 2022, and Miller has suggested those targets may need to keep rising.

The construction industry is short tens of thousands of workers, and experts say a coming wave of retirements could make the problem worse.

Meanwhile, Canada is millions of homes behind what’s needed to reach housing affordability this decade.

The job vacancy rate in construction is at a record high with around 80,000 vacancies in the industry,  CIBC deputy chief economist Benjamin Tal said in a recent note.

Those vacancies, which push up building costs and impede productivity, come at a time when the residential construction industry is under pressure to meet the demands of a growing population.

Canada Mortgage and Housing Corp. forecasts a need for 3.5 million more homes by 2030 than the country is currently on track to build.

The number of new homes built, however, has been in decline, from just over 271,000 in 2021 to 260,000 in 2022. And in May this year, the annual pace of housing starts dropped 23 per cent month over month, leading the CMHC’s chief economist to predict that just 210,000 to 220,000 new homes will be built by the end of the year.

Last week, the federal government launched a separate stream of entry for newcomers with work experience in skilled trades.

“It’s absolutely critical to address the shortage of skilled trades workers in our country, and part of the solution is helping the construction sector find and maintain the workers it needs,” Miller said in a statement, making his first major announcement as Canada’s new immigration minister.

“This round of category-based selection recognizes these skilled trades workers as essential, and I look forward to welcoming more of these talented individuals to Canada.”

Immigration, Refugees and Citizenship Canada (IRCC) said that by welcoming people in skilled trades such as carpentry, plumbing and welding, Canada can help its construction sector attract skilled workers.

But there remain questions about how the government can ensure those bringing the skill set to work in construction actually end up working in the sector and are able to navigate the certifications processes across the country.

Source: Canada ‘absolutely’ can’t build more houses without more immigrants, minister says

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Immigration Surges Past One Million — Canada Needs a Real Count and Real Plans

2023/04/24 Leave a comment

Annual levels plan needs to include temporary workers and international students rather than these being solely demand-driven. And better and more disaggregated data would be welcome although we have enough to understand the general trends:

Canada revved up its immigration machine last year to make up for the pandemic slowdown and recorded a new high of 437,500 new permanent resident arrivals. And the federal government plans to keep going, increasing permanent immigration targets to half a million by 2025 – 75 percent higher than the 2017 target level.

While public opinion remains broadly supportive of greater immigration, the impact on housing, health care, and broader community capacity has entered the debate. And to fully assess the effects, especially on housing, we need to look beyond headline immigration numbers. International arrivals for permanent and temporary visa holders not already in Canada need to be added to the equation. Precisely counting these groups is not an easy task due to data gaps and inconsistencies, but for 2022, we estimate the real total of arrivals last year was more than one million people.

The expansion of two-step immigration selection that prioritizes applicants with Canadian work experience and post-secondary education, allowed many applicants, such as temporary foreign workers and students, to receive approvals from within Canada. However, Immigration, Refugees and Citizenship Canada (IRCC) does not publish the data on their country of residence, making it difficult to understand the role of approvals for those already residing in Canada. According to IRCC data, this trend of applications from within Canada spiked during COVID. They made up fully 75 percent of 406,045 permanent residency approvals in 2021, but only 45 percent last year. This means the number of permanent residency approvals for people outside Canada – who create incremental housing demand – more than doubled between 2021 and 2022 to about 241,500.

Among those new arrivals are non-permanent residents. This category is growing rapidly, faster than new permanent residents, and is the most volatile element in population estimates. Non-permanent residents need to hold a valid permit to live in Canada and include temporary foreign workers, international students, refugee claimants and now a surging number of Ukrainians under a new authorization for emergency travel program.

In total, there were 1.3 million new temporary visas issued (excluding extensions and tourists) in 2022, a 45-percent increase from 2021. According to country of residence data, the number of new permit holders (e.g. temporary foreign workers and international students) whose place of residence was outside Canada grew by 83 percent from 2021 to more than 855,000 in 2022.

Combining permanent and temporary entry from outside Canada in 2022, the estimated total arrivals was more than one million (see Figure).

A new element of the temporary resident increase was the policy response to the invasion of Ukraine. Eligible Ukrainians can come to Canada for up to three years under the emergency authorization, and Ukrainians already in Canada can extend their visas. There is also a surge in Ukrainians arriving through other programs.  In 2022, only 29 percent (140,094 individuals) of the 478,357 approved applications arrived (another 66,000 have landed so far in 2023 through April 2). The continuing flow will substantially increase international arrival and non-permanent resident numbers in 2023 as Canada keeps receiving and processing applications.

Although some residents may leave Canada and some new arrivals are absorbed into existing extended family households, the available data points to an overall net increase in the number of arrivals as well as in demand for housing: the latest CMHC Rental Market Survey shows the national vacancy rate fell from 3.1 percent to 1.9 percent from October 2021 to October 2022.

Current trends indicate a larger influx of international arrivals (far outpacing temporary visa departures) in 2023 and further increases in housing demand. This would push the rental vacancy rate to near zero and worsen housing supply shortages.

Even if the Ukraine War ends swiftly and the labour market starts to cool down, requiring fewer temporary foreign workers, Canada still needs to address its housing crunch in both the short- and long-term.

In the short-term, prefabrication and modular construction, like those that non-profits have constructed for veterans may be needed.

Meanwhile, another concern is Canada’s data quality. Complex, confusing and even conflicting published data due to over- and under-estimates of temporary immigration figures hampers accurate and timely population and housing forecasts. First, one individual can have more than one visa in a calendar year, and leave prior to the visa expiry. As well, in another COVID response, the immigration department has allowed non-permanent residents with expired visas to remain in Canada while their application for visa renewal or permanent residency is under review. To obtain population estimates, however, Statistics Canada still assumes non-permanent resident visa holders left the country the month following visa expiry. Accurate data is needed for accurate analysis of resources and capacity planning to serve new arrivals. And evidence shows that there have been long term data gaps in tracking temporary residents.

COVID shutdowns and the Ukraine war illustrate how dramatic changes in the number of new arrivals can occur with lasting economic and demographic consequence. Using the correct metric in a timely manner is, therefore, critical. We need disaggregated data on permit issuances and arrivals by country of residence as well as data on the total unique count of temporary residents to make sure we know how many people are here.

Henry Lotin is an economist and principal of Integrative Trade and Economics and a retired Canadian diplomat, and Parisa Mahboubi is a Senior Policy Analyst at the C.D. Howe Institute.

Source: Immigration Surges Past One Million — Canada Needs a Real Count and Real Plans

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Immigration alone can’t keep Canada young

2018/03/21 Leave a comment

Reminder that the demographic argument for large increases in immigration to address an aging population will not by itself reverse the demographic trends:

Canada is getting older. Not just us Canadians as individuals, but our population as a whole.

Our fertility rate dropped below the replacement rate of 2.1 required for population stability way back in 1971. Life expectancy at birth has increased by more than nine years since then.

One consequence of low fertility and increased longevity is that the number of people past what we traditionally consider working age is rising relative to the people of working age. The ratio of Canadians age 65 and older to Canadians age 18-64 rose by more than 10 percentage points over the past 40 years, and will rise by more than 10 percentage points again over the next 40.

An aging population puts pressure on living standards, dampens growth of government revenue and presents fiscal challenges – notably to public pensions and health care. Since immigration has become a major contributor to population growth, and immigrants are, on average, younger than already-resident Canadians, immigration can look like an antidote to aging – a kind of national elixir of youth.

This hope does not survive an encounter with real numbers, as we show in a recent publication.

Running the federal government’s recent targets, and the recommendation for an increase to 450,000 immigrants annually from the government’s Advisory Council on Economic Growth, through a demographic model reveals that higher immigration, by itself, does little to alleviate the pressure of aging.

Raising immigration, whether to an unchanging level of 450,000 a year, or to a permanently higher rate of 1.2 per cent of the already-resident population, does not stop the ratio of retirees to workers rising further, and has negligible impacts on living standards.

An immigration policy designed to stabilize the ratio of retirees to workers would require massive inflows – 1.5 million annually over the next decade alone – that are outside the realm of economic or political reality.

By contrast, projections involving later retirement – an increase in the age at which we typically consider people too old to work – present a markedly brighter picture. A projection in which the average age of retirement rises from 65 to 70 over 20 years produces a stable ratio of retirees to workers over the next decade and a half, and a decline after that. More workers per retiree means faster growth in living standards.

Encouragingly, combining later retirement with a permanently higher rate of immigration produces a bonus.

Not only does that mix lower the ratio of retirees to workers and boost living standards throughout the projection, but it demonstrates some happy timing.

In the next decade or so, when the pressure of aging on living standards will be most intense, later retirement improves the outlook – and as that boost begins to fade, the slower-acting impact of higher immigration gives us a second wind.

The later-retirement example highlights a more general point. Canada needs policies to complement higher immigration targets.

Slower growth and higher taxes will make us less attractive to potential immigrants than faster growth and lower taxes.

If living standards are growing relatively quickly in countries that are potential sources of immigrants, and in countries that compete with us as destinations for immigrants, we will have a tougher time attracting the quantity and quality of people envisioned by advocates for higher immigration – a vicious circle.

If longer work life and other responses to aging makes us more prosperous, however, we will more easily attract immigrants and retain workers who can contribute to our prosperity – a virtuous circle.

Higher immigration may be good for many reasons, but it cannot keep Canada young. Other policies to ease the demographic transition, notably encouraging people to work longer, hold out at least as much promise for boosting living standards.

And those changes would complement higher immigration targets, by improving Canada’s attractiveness to people willing and able to contribute to the Canadian economy.

via Immigration alone can’t keep Canada young – The Globe and Mail

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