Housing crisis caused by higher immigrants and lower interest rates, Commission hears


The House of Commons Finance Committee heard on January 24 that Canada’s housing crisis cannot be resolved quickly due to a sharp imbalance between supply and demand due to factors such as population growth and low interest rates.

“The overwhelming cause of the deterioration in affordability is the structural imbalance between the number of residents and the number of residences,” Scotiabank’s vice president and chief economist Jean-Francois Perot told the Commission.

“The very fast pace of population growth observed since 2015 is inconsistent with the corresponding increase in housing supply, leading to a decline in per capita housing since 2016.”

From 2011 to 2016, Canada accepted an average of 202,012 new immigrants annually, according to data from Statistics Canada and Statistics Canada. From 2015 to 2021, when the Liberal Party came into power, there are an average of 300,362 new permanent residents each year.

Perot pointed out that Canada has the fewest per capita homes in the G7 countries and needs nearly two million additional homes to reach G7 levels.

“In our view, housing supply will not turn at an affordable price until it is much more sensitive to demographic pressures. The difficult reality is that even the best scenarios are likely to take years to get a better match between the needs of the population and what is available. “

Perot is by multiple levels of government, with Ottawa setting policies to control immigration levels and housing finances, and state and local governments controlling new paces, holding various means to address housing problems. Emphasized the problems that are caused construction..

He also mentioned how other federal policies, such as pandemic response programs, helped the housing crisis, but did not elaborate.

Conservative lawmakers and financial critic Pierre Poirievre said these programs were the main drivers of inflation.

“The $ 400 billion new cash generated by the government through the central bank into the financial and mortgage markets and the resulting negative real interest rates on adjustable rate mortgages are the last record witnessed by Canada. Do you think it affected mortgage inflation? Year? “He asked Philip Cross, a former chief economist at the Canadian Bureau of Statistics, who is now a fellow at the McDonald’s Laurier Institute.

“I don’t think there is any doubt that it contributed. [effect] And it played a big role, “Cross replied. “And we have given a huge amount of inspiration to housing.”

At the same time, immigrants began to put pressure on demand in 2015, Cross said, the Bank of Canada lowered interest rates, which also had an impact.

“Looking at the Vancouver and Toronto home price graphs, we didn’t do anything exceptional before 2015,” he said.

“The moment we cut interest rates in 2015 and the oil boom stopped in Alberta, immigrants to Canada stopped passing through Toronto, Vancouver, and Calgary. They just stopped. [stayed in] Prices in Toronto, Vancouver, and these regions began to explode in 2015 and have basically continued since then. “

Liberal Party lawmaker Yvan Baker sought to counter Poirievre’s claim that his government’s policies contributed to inflation. He focused on multiple factors of inflation besides the increase in the money supply and asked Perot whether inflation was a Canadian or global problem.

“Not only that, but as we see now, many are certainly global. I think many will be Canadian-specific and less will be global in the future,” Perot replies. I did.

Baker also sought Perot’s opinion on what would have happened if his government did not provide pandemic support.

“Certainly, the dramatic support provided to homes and businesses in Canada and elsewhere in the world is one of the reasons why global demand is as strong as it is today,” Perot said. I answered.

Stephen Moranis, co-author of Haider-Moranis Bulletin and former director of the Canadian Real Estate Association, also pointed out the imbalance in Canadian housing supply and demand and the slowdown in construction.

“A trace of the data back to the early 1970s shows that the population-normalized construction rate has declined significantly over the last 50 years,” he said.

According to his research, the country builds 10,000 new homes per million Canadians each year, a decrease from 5,000 to 6,000 in recent years.

To address this issue, Moranis has streamlined the land development approval process, consolidating all relevant stakeholders at various levels of government under one roof to formulate a national strategy and affordable. Dedicated rental housing by increasing priced housing spending and revising the tax system for capital acquisition.

“A predictable increase in housing demand, supported by a steady and predictable increase in population, requires a significant increase in housing construction rates to meet the growing population’s housing demand,” Moranis said. ..

Noe Chartier

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Noé Charter is a Montreal-based Epoch Times reporter.