Biden Has A Plan To Address Housing Supply. Why Doesn’t Trudeau?

The Canadian housing market has left prospective homebuyers and people looking for affordable housing feeling very frustrated.

With each home that goes on the market, many more people are looking to buy. These conditions have created bidding wars for homes that leave homeowners consistently selling for well-above asking prices.

Cities like Toronto and Vancouver rank among the worst in the world in terms of housing affordability. But, in recent years, the affordability crisis has spread outside these major urban centers to become a nationwide problem, as the cost of a home increases more than incomes do.

The rise in home prices has left young people, racialized people, and people with lower incomes shut out of homeownership.

Economists have pointed to the lack of housing supply as a key factor in rapid home price growth. According to a recent report from Scotiabank economist Jean-François Perrault, housing supply has failed to keep up with population growth, leaving Canada with 424 housing units per 1000 Canadians, the lowest ratio of any G7 country.

The situation in the US is not much better.

Home prices have surged; not just in large metro areas like New York and San Francisco, but across the country affecting smaller states like Montana.

Analysts have cited the lack of housing supply as a key factor driving the rise in home prices in the US.

The lack of housing supply is slightly above Canada with 427 housing units per 1000 people. Although to catch up to the US, Canada would still need to build another 99 thousand housing units.

To address the housing affordability crisis, Joe Biden has taken creative steps to increase the housing supply. In his proposed $2 trillion infrastructure bill, Biden seeks to remove some of the constraints on housing supply by eliminating exclusionary zoning and harmful land-use policies — like minimum lot sizes, mandatory parking requirements, and other prohibitions on multi-family housing through zoning regulations.

While these bylaws and regulations seem mundane, they put onerous restrictions on new developments making it difficult to build more housing supply. Under current conditions, the supply of housing cannot keep up with the rising demand, which can artificially raise housing costs.

In the bill, Biden proposed a competitive grant program that allocates $5 billion to award to jurisdictions that take strong action to remove constraints on housing.

Biden’s “purely carrot and not stick” plan would allow for localities to apply for funding by reforming restrictions on land use like height restrictions and lot size requirements. Much of the restrictions to housing supply are enforced at the municipal or community level, but Biden’s plan seeks to use the power of the federal government to create change in localities.

The plan is not perfect. Critics argue that merely offering incentives does not go far enough to ensure that housing becomes more affordable.

However, despite having more affordable housing costs relative to income, Biden’s plan is a more ambitious solution to providing housing affordability than anything that Trudeau has offered to Canadians.

In last month’s budget, the Liberals outlined a plan to invest $2.5 billion, and reallocate $1.3 billion in existing funding to speed up the construction, repair, or support of 35,000 affordable housing units.

Additionally, the government plans on introducing a national, annual 1% tax on vacant or underused residential property owned by foreign non-residents.

These changes, while a step in the right direction, is only a small reform that does not address the underlying insufficiency of supply and will certainly not tame the rising cost.

In April, Christya Freeland said that the Liberals want to work with provinces and municipalities on finding more creative ways to increase the housing supply.

But the Liberals have failed to do that.

If the Liberals want to provide tangible help to prospective Canadian homebuyers who have been shut out of the market, they need a much more ambitious plan like Biden’s to address the lack of supply that is at the centre of the housing affordability crisis.