Speaking notes: Why we need more housing

And what the federal government is doing

We had a Liberal/housing social event last night, which was a lot of fun - it’s always great to meet new people! I figured I should talk about what’s been happening on housing, especially at the federal level. It’s basically just an expanded version of Steve Lafleur’s tweet:

Why do we need more housing?

One of the biggest challenges we face is that housing is so scarce and expensive, not just in Vancouver but across the country. The housing shortage will be a huge issue in the next federal election, two years from now. As Liberals, we need to be prepared to talk about it. More importantly, the federal government is now tackling the problem with a great deal of energy and enthusiasm.

The simplest evidence that we need more housing is vacancy rates near zero.

The basic problem is a mismatch between housing and jobs. People don’t move around randomly, they move where the jobs are. In a number of cities, especially Vancouver and Toronto, we have a lot of jobs but not enough housing. So people are always moving here to live and work. But there isn’t enough housing to go around. Then prices and asking rents have to rise to unbearable levels, to force people who are looking for housing to give up and leave.

I’ve talked to many, many people in Vancouver who feel like they’re getting pushed out, like they’re just barely holding on by their fingernails. It’s a terrible situation for younger people and renters. High housing costs make people poorer. Renters are terrified of losing their housing and having to look for a new place.

Even for homeowners, there’s big downsides. When younger people can’t afford to live here, your own children end up having to move away. And we all depend on the healthcare system. It’s not sustainable when hospitals have a hard time hiring nurses and even doctors.

Because we’re reluctant to grow, Vancouver has become steadily more exclusive and expensive. We’re like a city-sized version of the Arbutus Club. You need a minimum income of $100,000 to move here, and that number keeps rising.

Normally, when prices go way up, you would expect people to build more housing. Problem is, it’s extremely slow and difficult to get permission. There’s often vocal opposition from neighbours. As Ginger Gosnell-Myers says, it’s easier to elect a pope than to get permission to build a small rental apartment building.

Pre-Covid, the federal government was focused on building more non-market housing to help lower-income households. But then Covid really lit a fire under the housing market, not just in Metro Vancouver but across the country. This has happened in other countries as well. With the giant surge in remote work, people want more space at home. So we suddenly have a surplus of office space, and a shortage of residential space. We now have a massive shortage of market housing, not just non-market housing. This is affecting younger people all the way up the income scale.

And housing is a ladder: it’s all connected. We have high demand colliding with the extremely slow approval process. New housing ends up getting delayed for years. The people who would have lived there don’t just disappear. They move down the housing ladder, competing with other people for existing housing. You get tremendous pressure on people near the bottom of the ladder.

In this situation, any project that adds more housing helps, anywhere on the ladder. The Senakw project is currently building 6000 rental apartments, 20% below-market, with 59-storey towers, on a small parcel of land at the foot of Burrard Bridge. (They can do that because it’s on Squamish reserve land, so the city’s restrictive zoning doesn’t apply.) Once those apartments are occupied, that’s 6000 renter households who won’t be competing with everyone else to try to find a place.

CMHC estimates that to get back to 2004 levels of affordability, we need to build about 3.5 million homes over the next 10 years, on top of the business-as-usual rate. This is a generational challenge, similar to the postwar period, or the 1960s when the Baby Boomers moved out on their own. Modest policy changes aren’t going to do it.

You may be wondering, is this actually fixable? Well, it’s not like going to the moon. We do know how to build multifamily housing. We have people who want to live and work here, and we have other people who want to build housing for them. The hard part is getting permission.

What’s the federal government’s plan?

To give him some credit, I think Pierre Poilievre has the correct diagnosis. Slow municipal processes and reluctance to build are effectively blocking badly needed housing. But his actual policy ideas are surprisingly weak. I don’t know if he actually believes the problem is solvable, or if he sees it mostly as a stick to beat the Liberals with.

I think it’s fair to say that the federal government has pivoted sharply on housing. Since September, the new housing minister, Sean Fraser, has been using the Housing Accelerator Fund to convince municipalities to get out of the way and allow more housing. He’s already doing what Poilievre has been promising to do after the next election.

Over the course of a few days: the federal government announced its first Housing Accelerator agreement with London. Sean Fraser sent an open letter to Calgary, saying that he would not approve their application for funding unless city council decided to move forward with their own task force's recommendations. (Which they did.) And he sent a letter to Halifax saying that for him to approve their application, they needed to allow four units and four storeys everywhere by right, with more near the universities. He’s been sending a steady stream of requirements out to individual municipalities since then.

As Steve Lafleur puts it, Sean Fraser realized he could wield the Housing Accelerator Fund carrot like a stick.

Besides the approval bottleneck, there’s also a cost bottleneck. Because rental housing is a low-risk, low-return business, increasing costs and interest rates meant that a lot of rental projects would no longer make business sense. They were pushed underwater. The federal government is tackling the cost bottleneck as well.

At the same time as the Housing Accelerator announcements, they announced that the GST will be removed on new rental housing. There was an earlier program called RCFI that provides low-cost loans for rental housing, but this will be a lot simpler and faster. Removing the GST will result in roughly 200 to 300,000 more rental apartments getting built over the next 10 years.

So the Liberal playbook is now clear: steal Poilievre's diagnosis and outbid him, going ahead and implementing a stronger plan for the next two years, leaving Poilievre to criticize from the sidelines. Mike Moffatt has a cross-sector National Housing Accord proposal, with a whole set of additional ideas that the federal government can pick up and run with. And of course we’re always happy to work with provincial and municipal governments. The BC NDP government has also been pushing hard on housing.

As Liberals, we’re now in a much stronger position on housing than we were just a month ago. What we can say:

Covid lit a fire under the housing market, with a lot more people working from home and wanting more space. We need a massive housing buildout for the next 10 years, both market and non-market. The new housing minister is very actively pushing individual municipal governments to allow more housing, and the Liberals are also willing to give up tax revenue so that building new housing makes business sense, at the scale we need.