Trudeau says housing needs to retain its value

May 23, 2024 – Population growth, zoning restrictions, development charges, real estate investment and other factors are pushing up housing prices and worsening the housing shortage in Canada.

For the federal government, the tension lies between:

• Canadian homeownership being widely attainable (good for younger people/aspiring homeowners), and it
• Continuing to be such a valuable asset (good for homeowner’s/older people/real estate investors/landlords)

Prime Minister Justin Trudeau was asked if homeowners should be willing to sacrifice some value of their home:

Q: Housing a zero-sum game. Existing homeowners want prices to stay high or even go up. Those trying to get into the market want it to come down. So do those who’ve broken into housing market in Canada need to accept some sacrifices when it comes to the value of their home?

No, I think housing prices and houses will always be valuable in this country.

I think anyone who hopes for the housing prices to remain on the kind of trajectory they’ve been on over the past decade or two should maybe think about what kind of society and world they want to live in, where only people who either inherited wealth or had very, very good timing and started launching a startup or whatever are able to actually get into a more expensive market.

Housing needs to retain its value. It’s a huge part of people’s potential for retirement and future and nest egg. I meant the difference between someone who’s rented all their lives versus someone who is a homeowner in terms of the money they have for retirement is massive and that’s not necessarily always fair.

So yes, we need to keep housing stable and valuable, but we have to make sure more people can get into it to build that kind of stability within our communities.

Prime Minister Justin Trudeau on The Globe and Mail’s City Space podcast

Critical reception

Very clearly, the government’s position is that it (housing) is an investment that needs to be protected. This is obviously the top priority in Canada. You can’t really have affordability when housing is viewed as an asset. Not only is it an asset for growing wealth, but an asset where that growth needs to be protected actively by the government

John Pasalis, Realtor and broker at Realosophy Realty

Open Council commentary

Trudeau and his government seem unwilling to admit that lower home prices and stronger incomes are necessary to improve affordability in the short- to medium-term, focusing instead on creating programs that further increase demand for housing – pushing prices higher.

They’re also taking a too-careful approach to increasing supply, leaving Canada needing 1.3 million additional housing units (181,000 annually) between 2024 and 2030 to eliminate Canada’s housing gap.

If you’re a young person and/or an aspiring homeowner, it is clear that the Trudeau government is prioritizing the wealth and retirements of existing homeowners over the prospects and aspirations of homeowner’s-to-be.

Supply can only change gradually, so realistically it’s the demand side that will drive the market over the short haul

There are only three things that could potentially improve affordability: stronger incomes, lower borrowing costs and/or lower home prices

Douglas Porter, chief economist with Bank of Montreal to The Globe and Mail

In many ways, Canada has been doing the opposite by creating programs that increases demand for housing:

• 2016-2021 – Canada was the fastest growing country in the G7
• 2023 – Introducing the First Home Savings Account, allowing first-time homebuyer’s to built up a down payment faster
• 2023 – 3.2% population growth (highest annual population growth rate since 1957 (3.3%)) from immigration of primarily non-permanent residents, which were primarily international students). Population growth drives up housing demand (rental yields go up due to 5 people to a basement which then makes it a more attractive asset class for speculators).
  • 471,771 permanent immigrants
  • 804,901 non-permanent residents (NPRs), majority were temporary foreign workers (TFWs), followed by international students
• 2024 – Increasing maximum amortization periods from 25 to 30 years for insured mortgages for first-time homebuyers who purchase new build homes.
• 2024 – Increased the HBP withdrawal limit from $35,000 to $60,000

Borrowing costs are greatly impacted by the Bank of Canada, which controls short-term interest rates by changing the overnight rate with the mandate of getting inflation to 2% per year. The Bank of Canada’s monetary policy operates independently from the federal government.