ICYMI: Douglas Todd: Why Vancouver housing prices became so out of whack

2024/02/07 Leave a comment

Not much new but neverthelesss telling:

Prices in Canada’s major cities have also been growing extremely fast compared to other countries.

The U.S. Federal Reserve Bank of Dallas, which monitors global economic trends, reports that Canadian housing prices since 2015 have skyrocketed roughly twice as swiftly as prices in the U.S., United Kingdom, Germany and France.

Why? Even the stodgy Bank of Canada, which is hard to accuse of being racist, in January acknowledged that the country’s rapid population growth, 98 per cent of which comes from international migration, has led to higher costs for housing.

The National Bank of Canada’s chief economist, Stefane Marion, is also among the many voices lamenting how years of welcoming record-breaking numbers of new residents is strongly contributing to inflation, especially of shelter costs and rents.

Unfortunately, many politicians and the development industry obfuscate the issue by putting virtually all the blame for lofty prices on a lack of supply, plus mortgage rates and bureaucratic red tape.

But a host of housing analysts, such as Steve Saretsky, John Pasalis, Ron Butler, Stephen Punwasi, Ben Rabidoux, Patrick Condon, Mike Moffat and others, counter that Canadian developers, especially in Metro Vancouver, have been building new housing at a frantic rate — yet still cannot come close to keeping up with demand.

That demand has been exacerbated ever since 2015, when newly elected Prime Minister Justin Trudeau began to crank up targets for new permanent and non-permanent residents to rates far more intense than any other Western country. Last year, Canada’s population grew by a record 1.25 million people because of it.

Meanwhile, a huge cohort of people in Canada who seek a place to live at a reasonable price, including many newcomers, continue to suffer.

For Metro Vancouver, it all adds up to a double whammy: The gateway city has its own distinct house-price problems, and it’s located in a country that compounds them.

Source: Douglas Todd: Why Vancouver housing prices became so out of whack

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Canada’s population sees biggest one-year increase on record, StatCan reports

2023/09/29 Leave a comment

Quoted on need for annual levels plan to include temporary residents and political will to curb growth:

Canada’s population is growing at its fastest pace since the distant days of the baby boom.

According to the latest Statistics Canada report, the population last year grew by more than a million — a 2.9 per cent rate, the highest since the late 1950s and one that outstrips, by a wide margin, every other G7 country.

At that rate, observed StatCan’s Patrick Charbonneau, the population, now at slightly over 40 million, would double in just 25 years.

The question those figures and that projection raise is this: Is Canada — famously in the midst of both a housing crisis and a health-care crisis — ready to deal with that many more people?

The growth — 98 per cent of it — has been driven by immigration, both permanent and temporary, and particularly by the numbers of non-permanent residents coming to Canada. Those include refugees, temporary foreign workers and international students.

In 2022-23, Canada took in some 1.13 million immigrants, the highest such figure on record, and almost half a million more than the previous year. Over the same period, the number of non-permanent residents increased by 697,701.

As of June 2023, the number of non-permanent residents stood at nearly 2.2 million, about 5.5 per cent of Canada’s population.

“Temporary immigration has surpassed permanent immigration for the first time last year in a context where permanent immigration was already close to a record high,” said Charbonneau.

Andrew Griffith, a former director general at the federal Immigration Department, said Ottawa has a well-managed immigration system of permanent residents, but the exponential growth of the temporary resident admission has made the population growth unsustainable.

Ottawa has an annual plan that sets admission targets for different classes of permanent resident, but the entry of temporary residents is uncapped.

“We have to have an integrated immigration plan that actually looks at both the permanent residents and the temporary residents, given that the temporary residence is largely uncontrolled and has been increasing at a very high rate,” Griffith said.

“If you look at its explosive growth over the past few years, the past 20 years, that obviously contributes to all the pressures on housing, health care, infrastructure and the like.”

He said the government’s immigration plan is developed in silos and doesn’t address infrastructure capacity issues when it comes to health care, housing, education and transportation.

Although public sentiment still largely favours the continued immigration boost and its economic and workforce benefits, many regions are already struggling to manage housing and health-care shortages.

Across Canada, rising prices and limited supply create difficulties for those seeking home rental and ownership. The Canada Mortgage and Housing Corp. said in a Sept. 13 report that Canada needs 3.5 million more units, on top of those already being built, to restore affordability. Sixty per cent of the demand for housing is in Ontario and B.C., largely due to supply lagging behind demand for 20 years.

On the health side, about six million people across Canada lack access to a family doctor, according to Canadian Medical Association data. Of those who have a family doctor, about a third experience overly long wait times to access them.

It’s a system already under strain, with doctors and nurses increasingly reporting stress and burnout, and some quitting.

An increasing population doesn’t necessarily dictate a health-care calamity, said Ruth Lavergne, a Canada Research Chair in Primary Care at Dalhousie University.

But she said the segment of the population supporting and working in health care needs to grow proportionately to the population. And we need to “rethink the organization of health care, to make it more efficient and better use the capacity that we have.”

Some of that capacity exists within the ranks of the newcomers, in the guise of foreign-trained health professionals. The problem is Canada doesn’t have a great record in helping them work here.

But streamlining the credentialing process can’t be the only fix, said Canadian Medical Association president Kathleen Ross.

She said the country will have to reconsider health-care delivery.

And that, to her mind, means reconsidering who’s doing what, where and when in the health system, and how to plug gaps without opening up new ones.

It also means changing how primary care works, reducing the administrative burdens on health professionals and better retaining them.

“We’re in a really unique time. Our emergency rooms, which are sort of the backstop, if you will, for a primary care system that’s not functioning well, are already over capacity and struggling with closures relating to our human health resource challenges.”

“These are all things we need to take into consideration, whether or not our population increases by a half a million or one-and-a-half million this year. It still behooves us to get back to the big discussion about how we are going to deliver access to care for all residents in Canada, whether they’re temporary or permanent.”

On the housing shortage side, the responsibility falls on provincial and federal governments to ensure Canada can withstand rising demand, said John Pasalis, president of Toronto brokerage Realosophy Realty. Over the past decade, he feels that has broken down as governments failed to scale investments in vital services in line with population growth.

Although immigrants often feel the brunt of the blame for these pressures, Pasalis said culpability lies with leaders who set ambitious immigration targets and allow universities to accept significant numbers of international students without investing in upgrading capacity.

“The people who are moving here are the ones that are kind of paying the biggest price in many, many cases.”

If governments don’t step up, all Canadians will eventually feel the squeeze, said Mike Moffatt, assistant professor in business and economics at Western University.

“We certainly either need to increase the amount of infrastructure built and housing built or slow down population growth,” Moffatt said. “If we continue to have this disconnect, we’re just going to have more housing shortages, less affordability and more homelessness.”

Instead of looking at newcomers as the source of housing strain, Moffatt says leaders should impose stronger restrictions on investors taking advantage of scarcity to drive up prices.

But it’s not just the supply of houses; it’s the type of supply. Those stronger regulations will need to be aimed at developers, too, said Marc Lee, a senior economist for the Canadian Centre for Policy Alternatives. The housing in highest demand — for low- and middle-income families — is not as profitable to build.

David Hulchanski, a University of Toronto professor of housing and community development, noted that Airbnb has also taken up available housing across the country, something he said could be curbed through stronger regulation.

“There’s this effort to blame our housing problem on an increase in population,” said Hulchanski. “It isn’t just supply, it’s the type of supply.”

Against this backdrop, Immigration Minister Marc Miller has talked about the need to rein in admissions of international students — around 900,000 this year — by developing a “trusted system” to enhance the integrity of the international student program.

Griffith said that’s not enough — Canada needs to impose a hard cap, though that will take a strong political nerve.

“The business sector will squawk about the fewer temporary workers. Education institutions will go bankrupt if they don’t have their international students. The provincial governments will get in the way because they have to actually pay for university (education) rather than allowing the universities to be subsidized by foreign students.”

Shutting down the international student program and the temporary foreign worker program, or making major reductions to those programs, seems unlikely, he said, but freezing at current levels and gradually reducing those numbers might be viable.

“It would be very contentious,” he said. “It boils down to a lot of political will.”

Source: Canada’s population sees biggest one-year increase on record, StatCan reports

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Douglas Todd: Remarkably popular book on baby boomers distorted by politicians

2023/09/02 Leave a comment

More on some of the false or at least misleading demographic arguments underlying current government immigration policies and organizations like the Century Initiative:

Daniel Stoffman was co-author of one of the most popular books written in Canada.

Boom, Bust and Echo: How to Profit from the Coming Demographic Shift sold more than 300,000 copies after it was published in 1996, with a followup in 2000. Stoffman, who died this summer in Vancouver, shared the royalties equally with University of Toronto economist David Foot.

The theme of Boom, Bust and Echo was that “demographics explains two thirds of almost everything.”

Stoffman and Foot maintained the baby-boomer bulge of Canadians, born between 1947 and 1966, would have a huge impact on trends in real estate, the stock market, eating habits, health care, and leisure activities, including, for instance, the future of birdwatching.

But an odd thing happened largely because of this best-selling book. Its spotlight on Canada’s baby-boom cohort of almost 10 million people has often been misinterpreted, if not distorted, by corporate leaders and federal politicians. That did not please Stoffman, a journalist, author and secular Jew who described himself as a “radical centrist.”

Stoffman, who once worked as a reporter at The Vancouver Sun and edited the University of B.C. student newspaper, The Ubyssey, wrote 13 books before he died in Vancouver at age 78 on July 3. They included profiles of Canadian Tire, Barrick Gold, Boston Pizza and McCain Foods, plus The Money Machine, an unusually readable look at the mutual fund industry.

But the more risky book for Stoffman, in contrast to the crowd-pleasing Boom, Bust and Echo, was the one he wrote to challenge business leaders and politicians who maintain, to this day, that aging baby boomers are the No. 1 reason Canada needs one of the highest immigration rates in the world.

Most commentators, scholars and journalists have only recently been catching up with some of Stoffman’s analysis in his book Who Gets In: What’s Wrong with Canada’s Immigration Program — and How to Fix It, which was a finalist for the Donner Prize in public policy.

Stoffman was pro-immigration. But in the early 2000s he wanted Canadians to think seriously about the complex, almost taboo subject. That’s what he did after winning an Atkinson Fellowship from his liberal newspaper, The Toronto Star, to write a groundbreaking series on it.

Today, more mainstream voices are joining Stoffman in questioning the platitudes streaming out of Ottawa, particularly from Prime Minister Justin Trudeau, who is currently justifying increasing Ottawa’s immigration target to a record 500,000 this year, double the 250,000 when the Liberals came to power.

Stoffman also anticipated the questions pundits are now raising about the federal Liberals’ related migration decisions to allow the number of foreign students and other non-permanent residents to reach almost two million, a figure CIBC’s Benjamin Tal cited this week. That compares to about half a million when Trudeau was first elected.

Former immigration minister Ahmed Hussen, echoing Trudeau’s talking points about the need to welcome immigrants, foreign students and guest workers to “grow our economy,” often justified his approach by referring to what he characterized as the baby boom problem.

“The question is: Why do we need immigration? Well, five million Canadians are set to retire by 2035. And we have fewer people working to support seniors and retirees,” he said, echoing similar remarks by other immigration ministers about the high costs of public health care for the elderly.

Stoffman’s book, Who Gets In, laid out some of the counter arguments economists are making today, which is that high in-migration can never replace an aging workforce.

The main reason is that immigrants also age. The baby boom generation is now aged 56 to 77, a cohort that includes millions of immigrants.

The second reason is many immigrants bring dependants. That is especially true under the Liberals, who quadrupled the number of parents and grandparents that could be sponsored.

The University of B.C.’s David Green and McMaster’s Byron Spencer, both economists, have their own unique way of responding to the supposed dilemma of aging baby boomers. Wryly, they say, the only conceivable way high immigration could offset Canada’s retiring workforce would be if every newcomer was a 15-year-old orphan. That’s because it would take 50 years for the teens to reach retirement age and, as orphans, they would not seek to bring in parents or grandparents.

Stoffman maintained there are two main reasons corporate leaders lobby Ottawa to keep immigration levels high, roughly triple per capita those in the U.S.

“I think the main purpose of Canada’s high immigration policy is to lower wages — and inflate real estate values,” he said in 2015.

The authors of Boom, Bust and Echo were aware, decades ago, of the two dangers. They recognized hiking immigration rates does indeed, as the politicians boast, increase the country’s overall GDP. But it also tends to lower GDP per capita, especially for low-skilled workers.

Stoffman said struggling immigrants best understood this downward pressure because they were the ones most likely to come to him after his speeches to express their worries.

In recent years, economists like Don Wright, former head of the B.C. government’s civil service, Mikal Skuterud of the University of Waterloo, and the B.C. Business Council’s David Williams have been strongly making the argument about lagging wages.

And a host of housing analysts, such as Steve Saretsky, John Pasalis and Ben Rabidoux, have also been warning about how high in-migration, including by foreign students and guest workers, puts intense pressure on rent and housing prices, which are at crisis levels in Vancouver and Toronto.

Stoffman was among the first to argue that Canada could deal with the societal costs of a large baby boom (which once made up 31 per cent of the population, but is now down to 23 per cent) by increasing productivity through innovation. Alas, in recent years productivity has fallen.

Another way is to offer incentives for Canadians to stay longer in the workforce, which the baby boom is doing. Canada could also encourage more people to have children, he said, particularly by providing better and cheaper daycare.

What would be an optimum number of permanent residents coming to Canada, leaving aside guest workers and foreign students? Eight years ago, Stoffman suggested a balanced number for Canada would be about 150,000 new immigrants annually.

Stoffman said he understood why right-wing people — “who think wage inflation is worse than income equality, and don’t want to see cab drivers and cleaning ladies earn more” — would promote “apocalyptic visions” about the need for higher in-migration targets.

“But it’s weird,” he wrote in Who Gets In, “that so many Canadians, who pride themselves on their social consciences and progressive politics, hurl nasty names at those who call for a more limited immigration program.”

Source: Douglas Todd: Remarkably popular book on baby boomers distorted by politicians

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Canada Strong and Free Network conference: Canada’s housing crisis panel excerpt

2023/03/28 Leave a comment

Notable reference to immigration and housing and how they need to align:

A panel on Canada’s housing crisis was packed with Hub contributors, including John Pasalis, who made the point that the country’s housing supply will not be able to keep up with its immigration targets.

“Governments need to sort out supply and find a way to build faster and build more before tripling our population growth. That should be a pretty basic concept, but apparently I was brought here because it’s controversial,” said Pasalis.

“You’re doing a disservice to everyone who is coming here,” said Pasalis.

Chris Spoke, a housing advocate and Hub contributor, said the issue of densification in big cities is a good one for conservative parties because they can upset big city voters who never vote for them with pro-development policies, and stem the tide of “Toronto refugees” who are moving farther out to the suburbs and pushing prices up.

“If you are a Peterborough NIMBY, you should be a Toronto YIMBY,” said Spoke.

Source: Canada Strong and Free Network conference: Canada’s housing crisis panel excerpt

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John Pasalis: Canada’s immigration policies are driving up housing costs

2023/02/04 Leave a comment

Although correlation is not causation given that other factors given domestic migration (rural to urban, interprovincial) and housing policies, high immigration levels are one of the more significant factors. Signal that some of the various analyses and commentary making the link are becoming more widespread, with Pasalis challenging a “third rail” of Canadian politics, immigration:

Ask a Canadian why home prices are so high and you’ll certainly get a whole host of answers from foreign buyers to greedy investors and, up to recently, a long period of low interest rates.

But the most common answer you are likely to hear is that a lack of supply of new housing in Canada is the primary cause of the high cost of housing.

The lack of supply narrative has been the dominant explanation for high home prices in Canada over the past five years. Every level of government in Canada cites a lack of supply as the primary cause for high home prices and countless academic and bank economists have made the same argument. Scotiabank’s chief economist went so far as to argue that a lack of supply was the underlying cause “for rising prices and diminished affordability”. When an economist says A causes B they mean that the relationship is a statistical fact rather than an opinion.

The debate regarding the key drivers of high home prices has been so one-sided it led Howard Anglin, former deputy chief of staff under Stephen Harper, to write a column in The Hub in 2021 titled, “The one factor in the housing bubble that our leaders won’t talk about.”

What’s the one factor not talked about? How Canada’s immigration boom is impacting the demand for housing and, by extension, increasing the cost of housing.

Over the previous decade, Canada admitted roughly 275,00 new immigrants each year. In 2022, Canada saw a record 431,645 new permanent residents and this number is expected to reach 500,000 annually by 2025.

An unequal two-sided problem

When considering these two demand and supply factors alone, demand for homes due to changes to Canada’s immigration level and the lack of supply of new homes to meet this demand, we see an interesting phenomenon. One factor, the lack of supply, has been discussed for many years, and year after year, political efforts to mitigate this issue have failed. The other factor, immigration, is one that policymakers have far more control over.

Policymakers don’t have any direct control over the number of new homes developers launch and complete each year, a number that has always been hard to achieve due to labour shortages and other factors, and is only expected to decline in the years ahead due to higher interest rates and the current economic uncertainty.

So why has the debate about the high cost of housing focused on a solution that policymakers have no direct control over, building more homes, as opposed to addressing the demand for housing from changes in our immigration level, something policymakers have direct control over?

I’ll highlight what I believe are the two primary reasons.

The false lure of the zoning panacea

A popular area of academic research has been to explore the role that local zoning policies have on the supply of new housing and home prices, and the academic conclusions on the surface sound very intuitive.

Municipalities that have relatively few zoning restrictions on the supply of new housing tend to have more affordable homes and experience more moderate growth in house prices because builders can more easily adjust to changes in demand by building more homes. Academics also argue that these cities with few zoning restrictions have fewer and shorter housing bubbles.

I’ll admit, it’s a wonderful story! If cities simply remove zoning barriers to new housing, builders will flood our market with new homes putting an end to years of rapid price growth and leaving us with an affordable housing market for all.

Unfortunately, the academic theories don’t hold up very well in the real world. Many of the cities that economists cite as having relaxed zoning policies which, in theory, should see modest price growth, such as U.S. cities like Houston, Atlanta, and Charlotte, have all seen a significant surge in home prices over the past decade. Cities like Phoenix in the U.S. and Dubai more globally which have relatively relaxed zoning policies experienced housing bubbles during the first decade of the 2000s because the supply of housing wasn’t able to keep up with the sudden surge in demand from investors.

The fact is that even with relaxed zoning policies, it’s very hard for the construction sector to respond to a rapid surge in demand for housing.

A report by the Bank of Montreal found that countries with higher rates of population growth also saw the most rapid increase in home prices, a result that is intuitively obvious, and one we are seeing in Canada. While it’s very easy for our government to double the number of immigrants moving to Canada each year, it’s extremely hard for them to double the number of homes being built to house these new Canadians. When housing completions don’t increase enough to match a country’s immigration goals, the result is what we are experiencing in Canada: a spike in the cost of housing.

Despite the evidence, the solution to our housing crisis promoted by our policymakers and expert economists continues to be rooted in the delusion that housing supply can respond to any sudden surge in the demand for housing if we simply reform zoning policies.

This does not mean supply-side reforms that encourage more housing and more density are not important, they are. But supply-side policies alone are not the panacea to our housing crisis that some academics and economists make them out to be.

A politically sensitive issue

The other likely reason that many economists have argued that a lack of supply is the cause for high home prices is because any suggestion that Canada’s record high immigration levels may in fact be the bigger driver of home prices runs the risk of being called xenophobic. I’ve experienced this myself from self-described “housing advocates” who believe that with the right zoning reforms, there is no limit to how many homes Canada can build.

But questioning what is the right level of immigration for our country, and whether the current level is doing more harm than good, isn’t xenophobic at all. It’s a critical policy question that for a long time has been ignored out of fear that one might be called a racist for even raising the question.

But the times are changing.

Over the past month we have seen a significant shift in this discussion. More journalists, economists, and editorials are questioning the goal of our federal government’s immigration strategy and whether their current immigration targets are doing more harm than good.

After years of silence regarding the impact our government’s immigration policies are having on healthcare, housing, and wages, more and more experts are starting to ask some very important questions. And not surprisingly, in virtually every column the author clarifies that they are not xenophobic or against immigration, but are noting some of the negative side effects of our country’s aggressive immigration strategy.

Why are more experts starting to talk about our government’s immigration targets?

It’s becoming clearer that the federal Liberal government’s strategy to nearly double the number of immigrants admitted to Canada each year without making the necessary investments to support them is straining our housing markets and health-care system.

A demand crush that further hurts renters

The other important factor is that many of the negative side effects of Canada’s immigration strategy are starting to be felt most by the poorest and most marginalized communities in Canada—including many of these immigrants themselves.

While the discussion about Canada’s housing crisis often centres around the high price of homes and its impact on first-time buyers, a bigger concern should be how our government’s policies are driving up the cost of renting as renters typically have much lower household incomes as compared to homeowners, and unlike homeowners they don’t benefit financially from the rising cost of housing.

To provide some context to the recent acceleration in rents, it is helpful to compare how average rents have changed before and after the current Liberal government took office in 2015.

Under the previous federal Conservative government, the average rent for a Toronto condominium went from $1,570 in 2006 to $1,866 in 2015, a $297 (or 19 percent) increase in nine years. In contrast, average rents under our current Liberal government have climbed from $1,866 in 2015 to $2,657 in 2022, a $791 (or 42 percent) increase in just seven years.

Am I suggesting that our current government’s change in immigration policy alone is responsible for this outsized increase in average rent in Toronto? Of course not, but of the most common explanations for the high cost of housing, from foreign buyers to low interest rates and even irrational exuberance, this one has the most direct impact on rents.

Calculating the demand and price of a property is more complex as the source of capital and the cost of debt are all important factors, alongside the usual factors such as the number of households requiring housing. Rent, on the other hand, is simply the cost of housing services, a cost more closely linked to the demand and supply for housing services, and not as impacted by other factors.

It’s worth noting that the higher appreciation in condo rents since 2015 was not due to a lack of building. Average annual condo completions were 12 percent higher after 2015 when compared to the period before 2015. This additional supply didn’t cool condo rents because Canada’s population was growing faster than these housing completions.

The impact of—and on—foreign students

The other aspect of Canada’s immigration policies that is often overlooked is the growth in the number of international students attending universities, which are not directly included in Canada’s immigration numbers today. An important part of Canada’s immigration pipeline, the number of foreign study permit holders in Canada has climbed from 352,330 in 2015 to 621,565 in 2021.

The Globe and Mail’s Matt Lundy argues that there is a simple explanation for this boom in foreign students: money.

The annual tuition for foreign students is five times what domestic students pay, so post-secondary institutions are doing what any profit-maximizing corporation would do: they are admitting as many foreign students as they can.

But unlike Canada’s program for permanent residents, there are no targets for foreign study permit holders—post-secondary institutions can admit as many students as they want each year. But while these institutions have the right to maximise their profits by admitting as many foreign students as possible, they have no obligation to ensure there is adequate housing for the students they are admitting. The lack of planning and investment from post-secondary institutions into the housing needs of their students means that the burden of Canada’s housing crisis has fallen in part on these often financially stretched students who are moving to Canada for a better life but are left feeling exploited. When foreign students are fighting for the most affordable rentals in their community, it also puts pressure on low-income households looking for the same.

It’s time to start asking harder questions about the negative side effects of Canada’s immigration policy. As economist David Green wrote, immigration is not some magic pill for saving the economy.

John Pasalis is President of Realosophy Realty, a Toronto real estate brokerage that uses data analysis to advise residential real estate buyers, sellers, and investors.

Source: John Pasalis: Canada’s immigration policies are driving up housing costs

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