A 2023 report from Ratehub reveals that as of March 2023, individuals wishing to purchase an average-priced home in Toronto need an annual income of approximately $217,000, while in Vancouver, the required income is around $200,000. This dramatic escalation in home prices prompts critical inquiries: Why has homeownership become so prohibitively expensive? What measures can be taken to address this issue?
Interestingly, a recent agreement between the Public Service Alliance of Canada (PSAC) and the federal government might offer a partial solution. The union heralded this deal as a victory because it compels the government to assess remote work policies on an individual basis rather than enforcing a uniform policy for all federal workers. This flexibility could potentially ease some pressures on the housing market, albeit modestly.
Some economists attribute the current housing issues solely to supply-and-demand dynamics. The Trudeau administration's goal to build 3.87 million new homes by 2031 aims to address that problem, but the situation is more complex. The simultaneous rise in both vacancy rates and rental prices in various Canadian cities indicate that other factors are exacerbating housing affordability issues.
This situation echoes the "stagflation" of the 1970s — characterized by stagnant economic growth, high unemployment, and high inflation — which challenged the Keynesian approach of stimulating the economy through increased spending during economic downturns. Similarly, Trudeau's strategy focused exclusively on expanding housing production might face difficulties, such as escalating living costs and concurrent increases in housing prices and vacancy rates.
Yet, if traditional supply-and-demand economics do not adequately account for the current situation, what underlying issues are at play?
One plausible explanation involves cultural influences: in North America, viewing homeownership as a fundamental milestone may significantly inflate housing prices. In stark contrast, only 31 per cent of the households in Switzerland — characterized by the World Economic Forum as a "firmly rental society" — own their homes, compared to 54 per cent in Canada.
Additionally, the enduring effects of the 2008 financial crisis cannot be overlooked. Prior to that crisis, the Bank of Canada promoted consumer credit and mortgage accessibility to boost spending, resulting in unsustainable levels of debt. This strategy was intended to mitigate the effects of stagnant wages and historically low expenditure, yet it only exacerbated financial instability up to the present day.
Still, perhaps the issue is more profound. The very notion of private homeownership is inherently unusual and illogical. The commodification of land requires its segmentation, but how can we logically divide the biosphere, which is fundamentally interconnected?
This idea resonates with political economist Karl Polanyi, who described land as a "fictitious commodity" — a relic of an antiquated mode of production, sustained through the explicitly feudal term "landlord," as though land ownership imparts royal authority. Indeed, it is ironic that defenders of landlords often champion the myth of Canadian meritocracy — that hard work results in wealth accumulation.
However, the reality is that being a landlord, or generating any form of passive income, typically involves amassing wealth without engaging in production or 'hard work.' It stems from merely possessing excess, owning more housing than one can reasonably use.
Considering these complexities, the PSAC’s recent triumph in enhancing remote work protection could unexpectedly propel forward the push for improved housing conditions. This change might alleviate some demand pressures in urban housing markets by enabling more flexible work locations, allowing individuals to reside further from costly city centres and potentially making housing more accessible and affordable.
Improved remote work protection could significantly impact the Canadian housing market by transforming numerous office buildings in cities, which have contributed to skyrocketing rental and mortgage rates, into vacant spaces.
These buildings, once considered fixed capital, would become fluid assets, opening up opportunities for repurposing into housing. With more people working from home, the need to live near city centres diminishes, allowing workers to move to less urbanized areas.
This geographical displacement helps spread the cost of living more evenly, providing cities like Vancouver and Toronto with much-needed relief from housing pressures. While this may not solve the housing crisis entirely, it can help displace its effects geographically until more comprehensive solutions are implemented.
The benefits are manifold. Indeed, research from Stanford University suggests that remote work boosts productivity by granting employees increased flexibility and autonomy, reducing commuting time, minimizing distractions and enhancing job satisfaction, while also decreasing commuting-related emissions.
Considering these comprehensive advantages, it is challenging to identify any significant drawbacks to this approach.
In this sense, PSAC's recent success in advocating for flexible remote work policies represents a pivotal opportunity for the federal government to embrace a strategy that could dramatically improve housing affordability across Canada.
By facilitating the conversion of underutilized office spaces into homes, this approach not only alleviates urban housing pressures but also encourages more balanced economic development. However, as noted earlier, this is not a complete solution — a myriad of other factors persist. This approach remains primarily supply-focused, displacing the housing crisis rather than holistically addressing the various cultural and sociopolitical factors that underlie it.
Nevertheless, welcoming remote work protection could spearhead a transformation in how we approach work and living, paving the way — or at least buying us some time — for a more sustainable and accessible housing market nationwide.
Elliot Goodell Ugalde is an academic, journalist and PhD student in political science at Queen’s University, Kingston, Ont., and a researcher at McMaster University in Hamilton, Ont., specialising in international relations, political economy and settler-colonial studies
Comments
Pushing workers out of Greater Vancouver is driving up rents in smaller centres. Eventually there'll be little variation in rents across the whole landscape.
Not just rents, the cost of housing as well. Since the COVID-19 pandemic, the cost of rent or housing is not much better outside of Greater Toronto area as it is within. Either way has become much more expensive, post COVID-19. With remote workers exiting the GTA, have driven up rents and housing cost all over southern Ontario. Housing costs have doubled in southern Ontario in may places. Houses in my area that went for $400K in 2020, are now $800K for the same home post pandemic. Crazy! I guess if you are an investor, you are rubbing your hands in glee over the price jumps. The jump in rents is just pure greed.
Well...most investors rent at least duplexes , or triplexes and places with more units. Economy of scale.
In this case, the guilty ones rubbing their hands gleefully are... home owners.
It's all about private property.