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Trudeau should be the leader in attracting investment to the real estate sector, not the enemy
Published on October 30, 2023 • Last updated on Oct 30, 2023 • 4 minutes reading time
Prime Minister Justin Trudeau during a press conference in Ottawa. Photo by Sean Kilpatrick/THE CANADIAN PRESS Files
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Housing construction in Canada has not kept pace with population growth since the early 1970s. But despite the evidence and recognition that inadequate housing supply has contributed most to worsening housing affordability, Prime Minister Justin Trudeau is now blaming investors and companies for contributing to the crisis.
Trudeau believes housing has been commercialized by investors and companies who “use homes as an investment tool – rather than by families who use them as a place to live, grow their lives and build equity for their future.”
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The Prime Minister’s comments, which reflect his understanding of the housing crisis, or lack thereof, should alarm Canadians, particularly those facing acute affordability issues. Canada Mortgage and Housing Corp. (CMHC), the federal government’s housing authority, assumes that 5.8 million apartments will have to be built by 2030 to make housing affordable again. CMHC continues to conservatively estimate that this construction will require more than $1 trillion.
If it doesn’t come from investors, where will more than $1 trillion come from over the next eight years?
When Trudeau made his comments this week, he was in Brampton, Ontario, announcing $114 million in funding for housing initiatives from his government’s $4 billion Housing Accelerator Fund. Well, $4 billion might sound like a lot, but the cost of building enough housing to restore affordability is more than $1 trillion, so someone somewhere will have to come up with the other $996 billion .
If the Prime Minister truly believes that real estate investors are part of the problem, Canada’s housing problems are likely to get worse and the goals for restoring affordability will certainly remain out of reach. The denigration of investors is the reason why there has been a lack of investment in housing construction in this country for decades. His comments do not help at a time when the country is desperate for real estate investment on an unprecedented scale.
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Trudeau would have been right to criticize investors if he had identified alternative sources of financing. But he did not do it.
Let’s face it: Housing is a commodity. Houses are bought, rented and sold. Every housing transaction involves an exchange of money. To suggest otherwise is a disservice to the country’s unmet housing needs.
Housing construction in large cities has historically been financed by investors. Even Paris is no exception. In 2018, we wrote about how Paris’s much-admired architectural form was the result of investments by – you guessed it – investors and speculators.
In “Selling Paris,” Alexia Yates, a professor at the University of Manchester, described “the people, practices and policies that sparked the greatest building boom of the 19th century and made urban development big business in the French capital.” She described “the “The way in which housing and property became commodities during a crucial phase of (French) urbanization.”
How is it that the urban planning literature in North America is full of praise for French cities—their high density, their bicycle-, pedestrian-, and transit-friendly transportation systems, and their Haussmannian boulevards—but completely ignores the supportive contributions of investors and speculators?
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Almost every single renter in Canada lives in a unit owned by an investor. From British Columbia to Newfoundland, five million households are housed in housing provided by investors, many of whom are companies that own purpose-built rental housing. Still, Trudeau believes investors and businesses are part of the problem.
Since 2015, when the Liberals took over in Ottawa, housing investment has been largely stagnant, save for an unexpected boom-and-bust cycle related to COVID-19. The value of single-family home permits has been falling since March 2021. At the same time, property prices and rents have risen to such an extent that they are no longer affordable for low-income households.
Consider that, according to the Canadian Real Estate Association, the average home price in Canada rose from $441,766 in 2015 to $703,574 in 2022, a 60 percent increase.
The federal government is active in housing and unveiled a 10-year, $75 billion national housing strategy in 2018. But the federal government’s investments have failed to improve affordability, suggesting the government cannot handle this task alone.
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Canada needs massive investment and lots of investors to make progress on housing affordability. It doesn’t help when the highest office in the land accuses investors of contributing to worsening affordability.
The Prime Minister’s Office must pivot and adopt a different narrative that recognizes the inability of the federal government and other governments to provide sufficient funding to build the housing needed in Canada. The PMO should be the leading leader in attracting investment into the housing sector, not the enemy.
Murtaza Haider is a professor of real estate management and director of the Urban Analytics Institute at Toronto Metropolitan University. Stephen Moranis is a real estate industry veteran. They can be accessed on the Haider-Moranis Bulletin website at www.hmbulletin.com.
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