"Our goal is to accelerate housing affordability so that everyone in Canada can participate fully in their communities and our society. Our new thinking must prioritize vulnerable populations – those who are at greatest risk of harm due to inadequate or unaffordable housing, including seniors – and confront the perceived negativity around housing density."
- Evan Siddall, President and Chief Executive Officer of CMHC (Canada Mortgage and Housing Corporation)
CMHC has laid out the 2021-2025 details of its plan for everyone in Canada to have a home that they can afford and that meets their needs by 2030. In doing so, CMHC has given Canadians a clear target to which it will be held accountable. Affordable housing is something we should all be cheering for but will this plan end up being successful?
CMHC has laid out its own performance measures and will also be leading NHS (National Housing Strategy) activities focused on creating new housing units and repairing/modernizing existing social housing. The NHS is a 10-year, $55+ billion plan designed to remove 530,000 families from housing need (living in homes that are inadequate or unaffordable).
The initiatives in CMHC's plan and the NHS are critical and there is no doubt that it will greatly help many Canadians. Programs targeting the most vulnerable will help us progress towards more inclusive communities with stronger economies. However, the NHS notes there are currently 1.7 million Canadians in housing need and the NHS goal is to assist 530,000 families. CMHC's plan appears to also be focused on those who are currently most vulnerable. If Canadian housing and labour markets were stable - perhaps this goal would be sufficient.
The unfortunate reality is that housing affordability has been consistently worsening in many communities. "Just move somewhere else" is a phrase that frequently comes up in various Canadian real estate discussions. Well we have reached the point where the options for doing so are becoming increasingly limited. Do we want younger millennials and entire future generations who are attached to their hometowns or fall in love with a new city to be told that there is no room for them? Major markets such as the Greater Toronto and Vancouver Areas have reached a point of extreme unaffordability that is resulting in migration to cities which have historically been less expensive. However, this activity will cause those other cities to face the same affordability problems. Just in 2020, they saw staggering home price increases, which are summarized below from CREA:
Annual price increases above 30%:
Quinte & District
Simcoe & District
Woodstock - Ingersoll
Lakelands region of Ontario cottage country
Annual price increases from 25-30%:
Bancroft and Area
Grey Bruce Owen Sound
Annual price increases from 20-25%:
Huron - Perth
Kitchener - Waterloo
London & St. Thomas
Southern Georgian Bay
Annual price increases from 15-20%:
Oakville - Milton
Annual price increases from 10-15%:
Greater Toronto Area
Annual price increases from 5-10%:
St. John's, Newfoundland
We believe the population of vulnerable Canadians will face significant growth in the coming decade, which neither of CMHC or the NHS have sufficiently addressed. While there are many drivers, these may be the most significant:
1. Rising home prices and cost of living compared to stagnant income:
Home prices are growing much faster than income and while many will mention the fact that interest rates are significantly lower, down payments have become a massive barrier to entry for many hopeful first-time home buyers. Even those who are saving as much as they are able can effectively have those savings wiped out by a single year of home price gains. Anyone who is enthusiastic about double-digit increases in home prices does not seem to understand the hopelessness that it brings to those that have not entered the housing market. Stable home prices are critical if we want to achieve affordability for all Canadians. If you are looking to become a homeowner in the coming years, try this tool which can help you set expectations and build a plan for making your down payment and closing costs.
2. COVID-19 recession:
The full economic impacts are still unclear at this point but we know that it has brought financial hardship to many Canadians. There have been mass-layoffs and the unemployment rate hit a record high of 13.7% in May 2020, falling to 8.5% in November 2020.
3. Job transformation resulting from automation:
The results of a Statistics Canada study suggests that 10.6% of Canadian workers are at high risk (probability of 70% or higher) and 29.1% are at moderate risk (probability between 50% and 70%) of automation-related job transformation. While it will impact certain groups more than others, automation will impact many Canadians of various ages, occupations, industries, educations, and income levels. The 55 or older age group is expected to be hit the hardest, at which point it is often difficult to retrain or re-educate. The 18 to 24 age group is expected to be the second most impacted, who will also not have any home equity at that stage in their lives. Source: Statistics Canada
CMHC's plan and the NHS do include a variety of measures that will benefit many Canadians but it is unclear how they will address the growing unaffordability and wealth gaps. Home ownership is not the only solution for Canadians but when passive real estate income is in many cases outweighing hard-earned employment or business income, renters are being left behind. As well, once markets are at the point where the average Canadian can no longer afford to buy a home, this hurts renters as they are forced to compete amongst themselves and drive up the cost of renting. To be fair, CMHC alone cannot address these issues or solve the housing affordability problem. However, it must be a stronger voice for Canadians in policy-decisions and its strategic plan must do everything it can to prevent more Canadians from becoming in housing need. As things stand, the vulnerable that are assisted in the coming decade will likely be replaced in even greater numbers.