The true villains of Canada’s housing crisis aren’t investors, they’re municipal politicians

June 24, 2021

Ginny Roth

Ginny Roth


Ginny Roth is a Partner at Crestview Strategy based in Toronto.

Ginny Roth is a Partner at Crestview Strategy based in Toronto.

Last week, a Toronto condo developer made headlines with a plan to buy hundreds of homes and then rent them back out to Canadians. This investment strategy is not new and should not be surprising. Investors are always looking for a better return. If you own a home in a major Canadian city, you know that asset’s value has far outpaced the growth of any other investment you hold. So, it makes sense that institutional investors would want a piece of the action. That is not to say that we should accept sky-high prices that make homeownership unattainable for the average Canadian. Indeed, the policy problem of unaffordability is one of the biggest of our time. But putting the blame for this problem on investors, while tempting, lets the truly guilty parties get away with policy malpractice of epic proportions. Canadians should want to get the villains of this story right, and our politicians should start finding ways to be housing heroes.

Canadian populists are not the first ones to try to pin the blame for this problem on corporate interests. When BlackRock, the world’s largest asset manager, made a big investment of this kind in the United States earlier this month, J.D. Vance (author of memoir Hillbilly Elegy and future senate candidate) tweeted his dismay. He portrayed BlackRock as cynically scooping up what few affordable homes are left, depriving aspiring American homeowners of their birthright. Vance has been right about so many key issues, but he is wrong on this one. BlackRock executives did not create the public policy mess that has made housing across North America as inaccessible as it is. Unfortunately, the same narrative seems to be taking hold north of the border. Conservative Leader Erin O’Toole tweeted out his displeasure at “billionaire investors” competing with first-time homebuyers. And his party’s parliamentary motion on housing, while a step in the right direction, focused predominantly on demand-side tools, rather than trying to tackle supply head-on.

The political temptation to blame buyers is strong, and calling them foreign, institutional or speculative turns them into excellent bogeymen. On an emotional level, this approach resonates with regular Canadians trying to buy. After all, when you keep losing bidding wars and find out the competition has way more buying power, it is hard not to think the deck is stacked against you. And in a way, it is. Canadians who feel priced out of home ownership have every reason to be upset but going after investors misses the forest through the trees. Pursuing demand-side solutions — from taxing foreign buyers, to rent controls, to taxing speculation — is like applying a Band-Aid to a massive head wound. It barely stops the bleeding. Politicians owe it to the next generation of homebuyers to identify the problem for what it really is.

There is one simple reason homes are getting so expensive. There are not enough of them. Canada is 1.8 million homes behind the G7 average and the problem is only getting worse as we welcome new Canadians and more young people get ready to move out of their parents’ homes. Aspirational homeowners are finding themselves competing for an increasingly scarce commodity, driving prices up even further. Presumably, then, the solution is at hand. We should just build more homes as quickly as possible and as supply catches up with demand, prices will drop. As prices drop, investors will turn to more valuable assets and regular homebuyers will have reasonable access to the market. And yet, this has not come to pass. This brings us to the true villains of Canada’s housing story, the municipal politicians who stand in the way of new housing.

Tune in to any virtual community consultation for a new development and witness local councillors opposing even modest densification. Of course, there are exceptions, but those exceptions prove the rule. There can be no progress made on housing accessibility without confronting those who enable the status quo and limiting their ability to do so. NIMBYism (grassroots efforts to stop new development) can certainly be a problem, particularly when so-called progressives reject affordable housing, but the NIMBYs would not be so powerful without the local politicians who indulge them. Municipal leaders across Canada are getting re-elected over and over by indulging local hand-wringing, stoking the flames of discontent, quashing new development and then taking a victory lap.

Bashing investors does nothing to confront the gatekeepers who oppose development. Fortunately, thought leaders have already equipped us with ideas for how to combat the real housing villains. The C.D. Howe Institute has suggested concrete measures that would increase housing supply, including making federal infrastructure funding contingent on improving density. And the government of Ontario, in addition to reducing red tape that can slow projects, just announced a plan to build new housing around its marquee Ontario Line transit corridor. There is incredible public demand for more solutions to the housing crisis. Politicians who want to help people and benefit at the ballot box should start by getting the problem right.

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