Why did our federal government ignore the warnings if the impact of Canada’s high population growth on housing was so obvious?
A report by the Canadian Press revealed that federal public servants warned the federal government two years ago that population growth has exceeded the growth in available housing and was putting pressure on healthcare and affordable housing.
Since that time, Canada’s population has surged from just over 400K people per year to just under 1.2 million people per year, and as expected, housing costs have surged.
So why did our federal government ignore the warnings if the impact of Canada’s high population growth on housing was so obvious?
If one looks back at the reports and op-eds from leading housing and bank economists at that time, one will find that the impact of high immigration on housing was not so obvious.
Most housing economists at that time observed Canada’s booming population, but concluded that this wasn’t the key driver of rising home prices.
The key driver of rapidly rising home prices, according to the experts, was a “lack of supply” driven by municipal inefficiencies and zoning restrictions. This incidentally continues to be the argument Canada’s federal government and Conservative Party leader Pierre Poilievre continue to put forward in his "Housing Hell" video which he released back in December.
I suspect that one of the reasons Canadian housing economists have been arguing that high housing costs are driven by a lack of supply is that this is the dominant academic theory today.
The theory is that high home prices are not caused by high levels of demand, but by municipal zoning restrictions that restrict the supply of new housing. And if cities allowed builders to build more homes – house prices would only rise at the rate of construction costs.
Last year, I wrote about some of the misguided academic theories that have been dominating the housing discourse in Canada and why I believe that Canada’s population boom was the primary driver of rapidly rising home prices.
The one big takeaway from the above Canadian Press article is that the arguments put forward by economists regarding our country’s leading economic issues really matters.
Had housing economists correctly argued years ago that Canada’s housing supply cannot and will not keep up with our government’s booming population growth targets and that housing costs were going to surge – citizens could have held our government to account as the problem grew - not now, when the damage has been done.
Now that most economists, including supply-centric housing economists, are slowly starting to argue that the demand for housing actually matters and that this crisis cannot be solved with a singular focus on supply – our politicians are not listening.
As long as the institutions that we rely on to hold governments to account - including academia, business and economic institutions, and the media - fail to accurately criticize the government's impossible solutions for our housing affordability crisis, expect the crisis to continue - and grow.
John Pasalis is President of Realosophy Realty. A specialist in real estate data analysis, John’s research focuses on unlocking micro trends in the Greater Toronto Area real estate market. His research has been utilized by the Bank of Canada, the Canadian Mortgage and Housing Corporation (CMHC) and the International Monetary Fund (IMF).