A Very Indecent* Proposal?

A very interesting proposal came out of Ottawa on Monday. Now is the time, they say, to bring back a post-World War II policy. At first blush yes, the idea has merit. In this article, however, I suggest that solving Canada's housing affordability crisis must involve the participation of all three levels of Government in a multi-pronged, multi-level, multi-year strategic plan of attack more akin to the planning involved in the D-Day invasion of Normandy.

I encourage you all to read Raisa Patel's very well-written article posted on the website of the Toronto Star on Monday (December 12, 2023) available here: https://www.thestar.com/politics/federal/the-liberals-are-reviving-a-wwii-plan-to-ease-the-housing-crisis-heres-what-that/article_eed9223a-9924-11ee-8ef7-7f68086d6aa2.html . (Raisa Patel on Twitter/X: @R_SPatel https://twitter.com/r_spatel LinkedIn: https://www.dhirubhai.net/in/raisa-patel/ )

Firstly, one could argue that the proposed policy is pre-World War II. Specifically, I remember and think fondly of the Sears Home Catalogue - https://en.wikipedia.org/wiki/Sears_Modern_Homes * - An interesting side note - they stopped making the homes in the early 1940's. (1942 to be precise per this Wikipedia article). These homes offered classical designs that remain to be high in demand to this day.

Now, having a catalogue of pre-approved plans could theoretically go a long way to speed up the approval process at the municipal or provincial level... there are likely, however, several catches or other considerations that must be thought of and explored.

Lengthy approval times are only one of the challenging issues in Canada's housing affordability crisis. By throwing all weight behind just one idea we will continue to cascade down several layers to the next level of challenges in the process. There is a simple reality that we must begin to accept however, good quality housing takes time to build... there just is not any one simple way around this challenge

Canada (and many other countries who are facing similar affordability issues) also needs to vastly increase the labour force involved. Planners and building inspectors are needed but specifically, the construction labour force (think of all the framers, roofers, foundation experts, electricians, plumbers, floorers, cabinet-makers, and HVAC installers we will require) who each contribute to the building of the very homes that we are talking about.

Lengthy approval times are only one of the challenging issues in Canada's housing affordability crisis.

We must greatly increase the labour force (and here I think of how the construction of the pyramids, the Suez and Panama canals, and the railroads of North America occurred - by throwing a huge labour force at a massive construction project, hundreds if not thousands of man-years were saved). As a note to you the reader, here I am asking you to please suspend the truth and harsh reality - that slavery or minuscule wages were involved in the construction of these edifices (to one person), so my apologies to you the reader.

We also require large tracts of vacant land, with the appropriate services available, upon which to construct these homes. The services and infrastructure that will be required with these new subdivisions include not only the water and sewer, streets, street lighting, sidewalks, etc. but also the electrical grid, the highway system, transportation services, and in many cases additional policing and fire services, etc. In many cases, this vacant land has competing priority issues - the best subdivision land is often Canada's best agricultural and/or parkland. It will take a true balancing act by our leaders to decide where our priorities should fall.

An interesting side benefit of having a catalogue of plans would be that it could allow for more prefabricated construction of housing. This would also help to increase the quality of construction through controlled working environments (think of building a building within a building - say perhaps a repurposed aircraft hangar or repurposed shipyard ( City of Summerside with Slemon Park Corporation OR the site of the former Georgetown Shipyard and Government of Prince Edward Island ( Twitter: @InfoPE ), here is a great opportunity for you!!) or a very large industrial building.

In this day of carbon credits, green energy, and our combatting of global climate change it is interesting to note that historically prefabricated housing moved, and still could move via our railway network - helping to save our highways from the high-carbon usage, and long-distance hauling of resources by truck away from Canada to the United States and even across our vast country. Sam Forman, a Stanford student citing statistics from Protopapas, et al. (2013), and D. Tolliver, P. Lu, and D. Benson (2013) states that "rail [is] over seven times more energy efficient than trucking in terms of global greenhouse gas (GHG) emissions" and 3.3 times more efficient in fuel savings.* Indeed, eastern Canada also enjoys the benefit of an interconnecting system of locks and canals that join the center of our nation via the North American Great Lakes system via the St. Lawrence Seaway and beyond to Europe, South America, the Middle East, and Africa via the Atlantic Ocean; while on the other end of the country, easy access to the Pacific Ocean to Asia, India, and Australia.

But I argue that perhaps we need to be thinking outside of the box here. Is single-family home ownership the appropriate route to throw all of our eggs into one basket? Should we also be taking into consideration the changing concept of what a home is to many Canadians?

But I argue that perhaps we need to be thinking outside of the box here. Is single-family home ownership the appropriate route to throw all of our eggs into one basket? Should we also take into consideration the changing concept of what a home is to many Canadians? The reality is that the Baby Boomer and Generation X concept of housing has changed for many in Canada. Today Generation Z and Millennials and even new immigrant families have been living together as groups and communities (arguably to help solve the affordability issue). I think some brilliant examples of thinking outside the box are the recent projects that CMHC has been involved in - by way of helping to fund and develop - a new multi-unit housing for First Nations persons that takes into consideration their specific needs - a smudging room for example - or a dedicated private prayer room for tenants with specific religious needs.

While professionally this is a touchy subject for me, as a curious individual I have to ask, should we also reconsider how and why housing is taxed at all levels of government within Canada? (This includes HST, property tax, Capital Gains, and the various fees, permits fees, inspection fees, etc. required when constructing residential property in Canada). The truth here is that the income generated by housing currently helps to provide funding for our roadways, hospitals, schools, policing, etc. and other services that we have all come to rely upon. I am simply asking the question: Should we be collecting taxes on housing in the same way that we have been and for what specifically should these taxes go towards funding? (Please note this is a "personal opinion question" and does not reflect the opinion of my employer)

According to Statistics Canada (2005), the taxation of residential real estate in Canada remains one of the most regressive forms of taxation - particularly in the larger Census Metropolitan Areas (CMAs). They state: "Households in lower income brackets pay a share of tax that is larger than their share of income; the reverse is true for households in higher income brackets." Is there a better way of collecting the funds our communities need? One that is equitable and fair - maybe taking into consideration the percentage of an income a person or family pays towards supporting these services?

According to Statistics Canada (2005) the taxation of residential real estate in Canada remains one of the most regressive forms of taxation - particularly in the larger Census Metropolitan Areas (CMAs)

As is typical with most Statistics Canada reports, Prince Edward Island's numbers typically report the numbers only for the Charlottetown CMA/CA (which takes in most of Queens County) - here reported a 2.75 ratio with a 0.11 standard error in Group C which represented communities not significantly different from the median municipality of Kingston, Ontario and Summerside CMA/CA (which takes in most of East Prince County) - reported a 2.31 ratio with a 0.14 standard error in Group B which represented communities that are less regressive from the median municipality of Kingston, Ontario. Again, it is important to remember this was a 2005 report (hard to believe that it has been 18 years since then). We must get greater detail in our collection of housing statistics, something I do believe that the Canadian, Provincial, and Municipal governments have been approaching seriously, and in some cases with coordination.

I also believe that to achieve "affordable," it will likely require the different levels of Government to step in with large blocks of funding to help backstop the short-to-medium-term financing of these new builds. Private investors will (rightfully so in a market-based economy) demand a return on their investment and maybe even investing say our CPP funds we might achieve a win-win situation for all Canadians (who knows it might even help to decrease the deductions made on our payroll wages?) Maybe it is time for Canada to create and issue Housing Affordability War Bonds for the first time in our history.

Image Source: https://en.wikipedia.org/wiki/File:NormandySupply_edit.jpg#filelinks

There is no doubt in my mind that increasing the number of homes (or housing units with alternative housing methods and concepts available such as multiple-unit or apartment buildings) will help solve the supply issue, which should, in turn, eventually help to ease and slow down prices (ala Economics 101) and just maybe help to return Canada's housing market to "normal" economic behaviours - where the greatest demand for housing will be in areas where they are most demanded. (Think Halifax, Montreal, Toronto, Ottawa, Edmonton, Calgary, and Vancouver.)

Unfortunately, as is the case with most wars there will be casualties involved - in this case possible economic casualties, we must do our part as informed citizens of a democratic society to minimize these impacts through detailed analysis and consideration of all of the different layers of this complicated puzzle. We must be prepared to fight this war on multiple fronts using a variety of methods until we can finally say the battle has been won, and even the war on housing affordability has been won.

Caveat: I am generally loath to think of too many "influencers" involved in a market outside of the typical free market participants in a real estate market. In my humble opinion, I believe that making manipulations to the various macro and micro economic levers over too long of a period - can end up making the market conditions significantly worse than (think depression vs. recession) they would have been had someone not played "economic God" with our markets. Whenever I envision someone attempting to artificially influence markets to change supply and demand, I cannot help but be reminded of the words spoken by actor Frank Morgan from the 1939 classic movie "The Wizard of Oz" - and please allow me some leeway here as I paraphrase... "Pay no attention to the man behind the curtain... I am Oz, the great and powerful! Who are You?

"I am Oz, the great and powerful! Who are you?" - Frank Morgan speaking as Oz, in the movie "Wizard of Oz" (MGM, 1939)

Who I am is Scott Wilson, P.App, AACI (Fellow), MRICS, FRI and I am a real property assessor, a professional property appraiser, and a former Realtor member from the province of Prince Edward Island. I am presently involved as a national board member of the Appraisal Institute of Canada / Institut canadien des évaluateurs . I have been involved in real estate on Prince Edward Island for over thirty years, and am a third-generation and fifth family member to be involved in the real estate profession on PEI. I earned my UPEI Executive MBA in Innovative Leadership from the University of Prince Edward Island as part of the first graduating cohort in 2012.

I am a passionate reader who enjoys strategic and innovative approaches to analyze both new and old problems. I love all things real estate, construction, architecture, economics, design, and innovation - as well as topics such as Leadership versus Management, Strategic Human Resources Management, Future Skills needs of employees and employers, Workplaces (space design) of the Future, and solving problems using the best practices of Evidence-Based Management (EBM), Research, Data Analytics, and Creativity.

Please note that the opinions contained in the article are solely my own/ personal opinions based upon my experiences and education in real estate and they do not represent the opinions of my employer nor the Appraisal Institute of Canada.

You can follow me online at Twitter/X, Mastodon (pkm.social), and on Meta's Threads app as @createpei (https://twitter.com/createpei) or via LinkedIn at https://www.dhirubhai.net/in/scott-wilson-mba-p-app-aaci-fellow-mrics-fri-68067812/. I hope that you have enjoyed this article and that it has helped to stir up some new ideas for you.

Sources:

Patel, Raisa (2023, December 13). The Liberals are reviving a WWII plan to ease the housing crisis. Here's what that means. The Toronto Star. https://www.thestar.com/politics/federal/the-liberals-are-reviving-a-wwii-plan-to-ease-the-housing-crisis-heres-what-that/article_eed9223a-9924-11ee-8ef7-7f68086d6aa2.html

Forman, Sam. (2022). Emissions From Rail vs. Trucking. Coursework for PH240 (Introduction to the Physics of Energy), Stanford University, Fall 2022. (Source: https://large.stanford.edu/courses/2022/ph240/forman2/#:~:text=%5B2%5D%20This%20makes%20rail%20over,into%20fuel%20efficiency%20as%20well. )

citing:

Protopapas, Annie & Kruse, C. & Olson, Leslie. (2013). Modal Comparison of Domestic Freight Transportation Effects on the General Public. Transportation Research Record: Journal of the Transportation Research Board. 2330. 55-62. 10.3141/2330-08. (source: https://www.researchgate.net/publication/270209128_Modal_Comparison_of_Domestic_Freight_Transportation_Effects_on_the_General_Public )

AND

Tolliver, Denver & Lu, Pan & Benson, Douglas. (2013). Comparing rail fuel efficiency with truck and waterway. Transportation Research Part D: Transport and Environment. 24. 69–75. 10.1016/j.trd.2013.06.002. (Source: https://www.researchgate.net/publication/259158473_Comparing_rail_fuel_efficiency_with_truck_and_waterway )

Statistics Canada. (2022). Mariage, I Do More Than I Don't. StatsCAN Plus (Dec. 12, 2022) [Webpage]. (Source: https://www.statcan.gc.ca/o1/en/plus/2507-marriage-i-do-more-i-dont )

Palameta, Boris and Macredie, Ian. (2005). Property Taxes Relative to Income. March 2005 PERSPECTIVES, Statistics Canada — Catalogue no. 75-001-XIE. Source: https://www150.statcan.gc.ca/n1/en/pub/75-001-x/10305/7796-eng.pdf?st=MBBK7_cM

*- NOTE: I researched the definition "Indecent" before writing this article - the definition I selected to use as my interpretation in the title of this article was from a Google search of the Oxford dictionary as: "not conforming with generally accepted standards of behaviour or propriety; or not appropriate or fitting."