Canada losing the housing dream
TheStar.com – comment – Canada losing the housing dream
February 14, 2008
Canadians have watched with fear and amazement as the subprime housing crisis has razed assets and crushed dreams across the United States. Yet sketchy loans and predatory mortgage dealers are only part of the American picture.
While subprime financing is foreign to Canada, much else is common: long-term erosion of housing affordability, an unprecedented increase in housing-related debt, as well as income insecurity and underemployment. Across North America, many middle- and lower-income households are suffering.
And unlike the United States, where housing bargains abound, affordability for Canadian homebuyers is now the worst since 1990. According to January 2008 data from RBC Economics, there remains no major Canadian urban centre where average home ownership costs â€“ mortgage payments, utilities and taxes combined â€“ are less than 30 per cent of household income.
In other words, much of Canada’s population now faces housing markets that exceed the generally accepted definition of affordability. Some cities, such as Toronto and Vancouver, now require from 44 to 70 per cent of average household income, respectively, to own and maintain an average-priced house. It is no wonder, then, that total household debt in Canada has increased by almost 50 per cent in the last 15 years.
The sad truth is that many Canadians will never own their own home, let alone have the same choice and affordability in rental accommodation enjoyed by previous generations. Yet double-digit housing inflation is tolerated, even encouraged, because it creates significant (and sometimes illusory) homeowner equity, and has created record profits within our financial and real estate sectors.
As affordability wanes across the country, homelessness continues to grow in many urban centres. From Toronto’s suburbs to Canada’s north, affordable rental accommodation remains tight and economic obstacles for Canada’s housing-poor are considerable. As many as 250,000 Canadians are homeless on any given day, representing a deep core of dispossession characterized by addiction, violence and disease. Poverty has become the defining characteristic of an increasingly diverse homeless population that includes families, students, new Canadians, aboriginal people and, too often, children.
It will cost Canada dearly to neglect housing in the future. As noted in Shelter: Homelessness in a Growth Economy, Canada already spends as much as $6 billion annually attempting to manage homelessness across all governments and jurisdictions. Canada chooses to needlessly warehouse a growing percentage of homeless who are often already employed and merely require affordable rental accommodation.
Canada’s leading urban and not-for-profit agencies have offered viable strategies and solutions. In January 2008, for example, the Federation of Canadian Municipalities launched a National Action Plan on Housing and Homelessness, and estimated that an average $3.35 billion annual strategic investment in housing could, in fact, improve Canada’s fortunes significantly. By reinvesting in existing social housing, as well as committing new resources to rent subsidies, assisted home ownership, and transitional and non-market housing, Canadians could see significant relief within a decade. Even better, perhaps, is the fact that Canada spends much of this money already.
A national strategy on housing and homelessness could turn our troubled, costly status quo into a tremendous opportunity. Chronic homelessness in Canada could be eliminated within 10 years. Young families could dream again about home ownership. Rental markets might offer more than overpriced, substandard housing choices. And Canada’s most vulnerable could access modest, safe, affordable accommodation â€“ and never again be forced to choose between food and shelter.
Today’s real challenge, it seems, is admitting that housing is an essential part of our future. As the Wellesley Institute recently reported, no less than eight of 13 Canadian provinces and territories have failed to live up to housing funding commitments made since 2001 â€“ including Ontario, which is now $1 billion behind in its plans. It shows that despite new funding, Canada is failing on the critical social issue of a generation.
It’s not money, ideas or ingenuity that we lack. It’s national leadership and political will.
And in light of American troubles, Canada would do well to recall that housing is a cornerstone of our economy, and has been the main source of new personal wealth for the last decade. Conversely, homelessness and housing insecurity, unchecked, will ruin the health of our cities and towns, and further compound incidence of malnutrition, child poverty and unemployment. Perhaps it is time we began to take this prospect seriously.