These experts set sights on solving Canada's housing crisis
Lorne Burns
Lorne Burns is an FCPA and former KPMG national industry leader for real estate (2011-2021).
How would you assess the current housing crisis in Canada?
Canada’s changing demographics have drastically impacted the demand for housing, but it’s not only because of population increases. People are getting married later in life. As a result, they’re living on their own longer. The largest increase in any demographic for housing is in single-person households, and we just haven't been able to construct enough to keep up with the demand. On the supply side, the challenge of housing affordability is driven by how expensive it is to build homes in Canada. The cost of construction has increased dramatically over the last 10 years. Inevitably, housing is going to cost more, and when you factor in growing demand and high interest rates, you’ve got yourself a ticking time bomb.
What role can CPAs play in tackling the housing crisis?
The profession is well-placed to articulate the extreme magnitude of the investments required to address this crisis. CPAs can communicate that the only way we're going to solve the daunting financial challenge is by having all hands on deck. We’re going to need financial resources in the private sector, from lenders and institutional investors, and on the public side, through government funding and incentives. No one source can do it on its own. Everybody has to participate. Everybody has to collaborate.
What are the obstacles in addressing the short supply and high demand in the housing market right now?
The most frustrating constant in the housing crisis debate is how all the different parties villainize each other. Investors who buy properties to rent them out are providing a solution for renters who can’t afford to buy, but they’re often depicted as the problem by affordable housing advocates. Governments on all levels criticize developers and institutional investors, and vice versa. This villainization gets us nowhere.
What innovations and policy changes do we need to solve the housing crisis?
The large majority of Canada’s purpose-built rental stock was built between the 1960s and 1980s. At the time, the federal government had incentives and tax credits in place to encourage rental development. For example, the Multi-Unit Residential Buildings (MURB) scheme was created in 1974 to offer tax deductions for rental building owners. But there were well-publicized abuses of programs like MURB, which led to them being shut down. Today, compared to the United States, our rental stock is far behind in terms of quality and quantity. Reinstating programs like MURB can help us meet rental market demands. However, because of previous abuses and the associated political risks, policymakers are wary of bringing back those old incentives. This is another area where CPAs can play their part: by establishing stronger ethical codes and transparent reporting for participating parties, they can ensure that these programs are not abused like they were in the past.
Mike Gallagher
Mike Gallagher is a retired CPA with 38 years of experience as a controller and director of finance in the Thunder Bay, ON, area.
How would you assess the current housing crisis in Canada?
Everyone's calling this a housing crisis, but a crisis is something temporary. The housing situation in Canada has been a compounding problem for decades, and that compounding problem has now come to a head. Record immigration has outpaced housing development. Speculators are buying up properties as investments and leaving them vacant. Short-term rentals are further cutting into the housing supply. Federal and provincial governments are addressing our housing shortage by incentivizing new construction, but their approach is predominantly benefiting the medium to higher-income brackets, leaving those in poverty, as well as seniors and immigrants, struggling for affordable housing. Unsurprisingly, these factors have contributed to rising housing costs that have hindered the country’s social progress and created a systemic lack of adequate housing.
Beyond the most expensive major urban areas like Toronto and Vancouver, how has the housing crisis impacted smaller Canadian cities like Thunder Bay?
They’re experiencing similar issues: homelessness crises and year-round homeless encampments, as well as an overall lack of affordability. In Thunder Bay, real estate is relatively cheaper compared to our largest cities, but at a $325,000 for a median detached house, home ownership is still out of reach for many residents. This includes recently-arrived immigrants, who are becoming a more significant part of small-town Ontario’s demographics as its population ages.
What innovations and policy changes do we need to solve the housing crisis?
We should consider bold actions on the taxation front, such as substantially raising existing taxes levied on vacant or underused properties—Toronto tripling its vacant home tax last fall is one good example—and implementing more drastic progressive tax systems targeting short-term rental income: the more short-term rental properties you own, the higher your tax rate. Otherwise, new government-funded reimbursement programs for landlords who provide housing below market rates could bridge the affordability gap. Governments must also prioritize not-for-profit entities focused on building affordable housing rather than subsidizing high-end developments. Repurposing underutilized spaces like vacant office buildings for dense, low-cost housing is another viable solution.
How can CPAs use their expertise to turn those proposed solutions into a reality?
Housing has always chiefly been a for-profit sector in Canada. Profit itself is not a problem, but what we’ve witnessed over the past few decades is that the current model is driving up the cost of housing and not meeting the needs of all Canadians. As CPAs, we have to ask ourselves what's wrong with this model, particularly from a corporate social responsibility perspective. In recent years, we’ve devoted a lot of our efforts toward the environmental side of ESG regulation, but we must also concentrate on the social side. We can do this by creating metrics through research and white papers that help businesses develop profitable approaches to provide Canadians with adequate housing. These efforts will also meet the demands of younger generations who want to invest in companies that make a profit while also benefitting people from every walk of life. Affordable housing solutions, like the ones I’ve outlined above, can meet both of those requirements, and we must show investors and businesses the path towards accomplishing these goals.
Maya Kambeitz
Maya Kambeitz is CEO of Norfolk Housing Association (NHA), a Calgary-based community housing provider.
From your perspective as CEO of a non-profit community housing provider, how would you assess the current housing crisis in Canada?
This crisis is a result of governments of all stripes stepping away from housing and failing to recognize it as a key social determinant of health. As a society, we’ve assumed that the private market will respond to demand from all Canadians. That’s simply not happening: there is a lack of investment and prioritization for a sufficient supply across the entire continuum of housing. The financialization of housing is harming many Canadians because we’re trying to extract value from something that is a basic human need.
How does NHA help address the housing crisis?
NHA was a community response to ensure that families of all incomes would be able to secure housing in Calgary’s Hillhurst and Sunnyside neighbourhoods. As a non-profit, social enterprise, we invest our profits into capital improvements and expansion of our housing stock. We currently manage 138 purpose-built rental units. In our buildings, 50 per cent of our residents pay rent that’s geared toward their income, rather than the going market rate. Post-pandemic, this is a vital need in Calgary, where one in five residents are unable to afford adequate housing.
Would the housing market benefit from increased investments that emulate NHA’s model nationwide?
Definitely. Right now, we are the only 50/50 mixed income housing provider in Calgary. When NHA began operating in 1980, the federal government was quite involved in housing, and so it was able to obtain a decent level of funding. But over the years, this funding has dried up. The community housing sector deals with same challenges as the private sector, but we have comparatively very limited access to capital and equity. For example, we don't have a rental acquisition financing fund under our federal National Housing Strategy. Prioritizing homeownership is not the only approach. Approximately a third of all Canadians are renters and that proportion is expected to grow. We've prioritized community housing before in this country and we can do it again.
What role can CPAs play in increasing the prioritization of community housing in Canada?
By exploring financing models that overcome the barriers faced by community housing providers, CPAs can help preserve existing rental stock and prevent its transformation into unaffordable developments. CPAs can also educate the private market on the economic and social benefits of engaging in this space. For example, there is a direct causal link between the proportion of community housing within the overall housing stock and economic productivity. CHRA, Housing Partnership Canada, and our sector partners commissioned Deloitte to produce a study on the impact of community housing on Canada’s economic productivity; the study showed that if Canada brought its community housing stock up to the Organisation for Economic Co-operation and Development (OECD) countries’ average of seven per cent by 2030, it would increase economic productivity by 5.7 to 9.3 per cent. That amounts to a boost of upwards of $136 billion in our GDP. CPAs can also make the social case for investment in community housing. After all, businesses will undoubtedly benefit from partnering with community housing providers in the areas where they operate and where their workforce lives.
Jo-Ann Lempert
Jo-Ann Lempert is an FCPA in Montreal. She is Quebec leader for MNP’s Real Estate and Construction Group.
How would you assess the current housing crisis in Canada?
Housing prices climbed up tremendously before recent interest rate increases, and yet they still haven’t dropped off as much as expected in major cities like Montreal. Buyers are now hesitant to enter the market because of those high interest rates, which has left things in a bit of a stalemate: a lot of homes are sitting on the market at high prices that few are willing to pay. There are also critical concerns that many homeowners who entered into mortgages in the early days of the pandemic—when interest rates were subprime—will have a hard time renegotiating their loans when they come to term in the next two years. If highly leveraged homeowners default on their mortgages en masse, that could send ripple effects through the economy.
What can Canadian homeowners and the real estate and construction sector do to manage the housing crisis?
Right now, a lot of Canadians are getting caught off guard by the impact of rising food costs and interest payments on their bottom lines. That’s why they need to take a page out of the CPA playbook and devote more time and effort into monitoring their spending and forecasting their expected cash inflows and outflows. Similarly, companies must diligently work with financing partners, their lenders and investors, to ensure they're constantly managing their expectations and capitalizing on opportunities to minimize financing costs.
How can CPAs play a role in helping Canadians and businesses in this space?
Many CPAs work closely with the different players in the housing market, including bankers, developers and investors. This provides them with a unique understanding of all their needs. For CPAs who work in assurance like myself, we’re also not allowed to have a stake in the game. This objective position places CPAs in the ideal role of communications facilitator: if I'm bringing parties to the table, it's specifically because I have no interest other than enabling everybody to understand each other and to work well together.
How can CPAs help clients navigate the ongoing risks and uncertainties of Canada’s housing crisis?
Education is important. On a local level, CPAs are well-connected in their communities, which gives them the ability to advise stakeholders about evolving economic factors and potential policy impacts, safeguarding against threats that could harm the housing market. Communication and transparency with stakeholders are also key. There are all kinds of software for forecasting, budgeting and cash flow analysis to make sure you're on top of things. But software can only take you so far. CPAs cover your financial bases, but they also can understand and report on the core metrics that lenders and investors care about. Managing trust and reciprocity in those relationships is so vital when the market is unpredictable.