Governments Created the Housing Crisis. Here’s How They Can Fix It

The roots of our housing crisis: austerity, debt and extreme speculation.

‘Developers were only too happy to keep building safety deposit boxes in the sky, helping domestic and foreign capital — rather than people — find a home.’ Photo by Magnus Larsson, Creative Commons licensed.

We’re now 10 years on from the biggest financial crisis since the Great Depression. Or, as our national mythology puts it, 10 years since Canada breathed a deep sigh of relief as the crisis mostly grazed our economy and financial system.

Since 2008, we’ve had 10 years of congratulatory back-patting over our system of financial regulation, 10 years of low inflation and low interest rates, 10 years of periodically oil-driven economic growth — and 10 years of exploding housing prices, of renovictions and demovictions, of working people pushed out of some cities and a real estate investment bonanza for the homegrown and foreign rich.

The neoliberal state we’ve inherited prides itself on not interfering with or, god forbid, regulating markets and financial flows except when inaction might be systemically destabilizing. Unfortunately for the government, our housing sector needs patching up — even if it means breaking out the red tape.

Both Ontario and British Columbia have instituted foreign buyers taxes. B.C. has also implemented a mildly progressive property tax on homes valued at over $3 million and increased property transfer tax rates. Vancouver has an empty homes tax starting this year.

These measures, which are welcome and contributing to cooling the two most haywire housing markets (Vancouver and Toronto) in terms of both sales and price growth, are nonetheless insufficient to the scale of Canada’s housing affordability crisis.

Luckily, the alternative policy toolbox is full for those willing to make use of it. Here are some of the sharper implements:

• • The direct provision of non-market housing. The public sector should be an aggressive “builder of first resort” that embarks on a massive build-out of high-quality, democratic, non-market housing that the poor, working and middle classes can afford. Direct publicly provided housing, private non-profit housing, co-ops and community land trusts are all good options. Not only would a rapid build-out eliminate some of the current stigma around social housing, it would directly challenge both the primacy of the market and the prices it currently sets. And it would pay for itself in the long run, courtesy of the joint magic of state-backed credit, existing public urban land and cross-subsidization.
  • Stronger tenant protections and rent controls. These measures help people stay in their homes, reduce potential future income streams from land and bring tenancy closer to ownership in terms of stability, security and control.
  • An end to exclusive zoning in cities. We can carefully dismantle the system of exclusion that maintains a false scarcity of land and keeps significant portions of our cities off limits to renters and workers. At the same time, we should introduce measures to capture any increases in land values to incumbent owners and redirect that money to the public good.
  • Reform of the tax system. Several tax changes would make housing less attractive as an investment relative to other assets and generally increase carrying costs. These include progressive and overall higher property taxes geared toward the taxation of land value at the local level, taxes on capital gains from short-term speculation at the provincial level, and an end to preferential treatment of capital gains at the federal level.
  • More generous public pensions. Less pressure on housing as a retirement asset would bring the value of homes and land more in line with their role as places to live.

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