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When governments burn the future to save the past they do it with housing
In the United States, there is a clear age gradient for voting: the young vote for the left, the old vote for the right. This is partly due to changing racial composition, but not entirely. Young whites are much more likely to vote Democrat than Republican. But in Canada, this is not the case. Here, there is almost no age gradient at all in vote intentions.
A standard model for politics is a combination of (1) people’s opinions on social issues settle fairly early in life and as Cthulhu swims leftward their views end up further and further right, and (2) as people age they become more economically secure and less and less likely to benefit from redistribution.
Canada violates this model for a few reasons. Our welfare state – which spends lavishly on the old – is the lynchpin of our nationalism: “We aren’t like those damn Americans” the Boomers cry as they hold on to their OHIP cards and wait for 8 hours in an emergency room. What it means to be a Canadian these days is to support large government and this keeps the old attached to the left. The right in Canada is also pretty neutral (neutered?) on social issues so issue #1 above is not that important – at least until abortion trots out during the election.
However, this has all be throat-clearing for my actual point. Canada now has a special issue which creates cross-cutting electoral incentives by age: housing. For decades one of Canada’s selling points has been that it’s a peaceful, moderate place that is cheap to live. That has been completely destroyed over the past decade under the leadership of the Liberal Party. The Liberals are the party of the status quo and don’t see it as a problem that prices are high. Just yesterday, Prime Minister Trudeau gave an interview where he said: “Housing needs to retain its value. It’s a huge part of people’s potential retirement and future and nest egg. So yes, we need to keep housing stable and valuable”. On the policy front and despite high interest rates, the government is letting people pull money out of RRSPs (equivalent of 401ks) for downpayments, instructing the Bank of Canada (equivalent of the Fed) to buy mortgage-backed securities to make borrowing cheaper, and creating new tax vehicles for home buyers. Despite promising to lower net migration, the stats show that a record 400,000 people arrived in the first three months of 2024.
In other words, the Canadian left (the lefty NDP party is in coalition with the Liberals) is spending more and more tax money to prop up home equity and price its young people out of homes on purpose. In Canada the institutional left sees its role as protecting middle class wealth. High house prices have existed in our big cities for decades and prompted a steady stream of Canadian outmigration to cheaper places. Cities kept growing because of replacement immigration. In 2020 however due to the pandemic and a surge of workers and student immigration to rural areas, unaffordability has spread nationwide and now literally nowhere is spared. Houses in small towns hours away from major cities generally cost over $400k. This has caused a deep well of anger and despair among the young. It shows up in polling to some extent, but anecdotally: one of my friends just moved to Colombia to become a remote worker … because of housing, another one abandoned trying to get pregnant … because of housing. A friend circle I’m near to is fracturing because half of it inherited homes and the other half will rent forever, and that fact is too corrosive to the friendships. Its just too hard to watch your kids grow up in an apartment you can barely afford while your friends live in a better neighbourhood and go on vacations.
In a normal society, housing is not a politically important issue. Its just a good like any other. But if house prices rise as they have here, your society has made a Faustian bargain. The older generation become millionaires despite barely saving, but it comes at an enormous cost. Social cohesion frays, more and more GDP gets paid to parasites realtors, high land costs mean new building also consumes more and more GDP, without the basics covered young people wont start businesses, cost of living soars for the poor and young, governments face pressure to both get new buyers into homes and preserve home values which means wasting money and mass immigration, etc. And the lucky ones who see their asset prices rise? They aren’t always better off either! Most will see their kids move far away or borrow against their homes to give their kids downpayments. Housing in a world like this is a special issue because it is truly zero-sum: one person's cost of living is another person's asset. Depending who you are, you want prices to be higher or lower. This is a nightmare for governments because there is no easy third option: your policies will inevitably hurt one group or another on the single most important factor for their financial health.
In short, it’s a disaster. Given how far its gone, there is no way for normalcy to return with economic growth (it would take decades for real incomes to rise sufficiently) so there are only three end games: (1) Canada becomes like Southern England or San Francisco, a dual society of property owners and proles, (2) inflation re-ignites and incomes rise enough in nominal terms to re-establish affordability, or (3) the crash and ensuing recession. I don't know which of the three is my prior or even which to root for. The new political consensus is for government to respond with overwhelming force to economic downturns and do what it takes to protect assets, especially housing assets. Political forces are arrayed in pursuit of outcome #1. Its possible that inflation is re-establishing a limiting principle for how much this will work in future, but it may not and we get scenario #2. There may also be a sui generis event or a conservative ideological policy mix after the next election that causes #3.
https://josephheath.substack.com/p/a-critical-theory-of-or-for-america
I think Canada is moving to build more housing, despite Trudeau's lip service to protecting housing prices. There's just a delay between realizing there's a crisis and actually getting housing built.
It's not even close to the scale required to address the problem. The important number is nestled in the middle of OP's post, so you might have skimmed over it. 400,000 people in 3 months. Graph of population increase vs housing completions.
Canada is taking in over a million people a year, and building maybe 1/4 of the housing (not to mention the other infrastructure) needed to support that growth.
That's not typical though. A lot of that is temporary residents. The government is targeting 500,000 a year, so you can expect that to be the long run average.
The government says they're targeting 500k a year, but should we believe them?
In flagrant violation of the first law of holes, they have not stopped digging. There is a massive housing crisis in the country, and immigration is the first and most available lever the federal government has on the problem. Ottawa (mostly) can't build homes directly, at least not on the scale the country needs. Trudeau's "ambitious housing plan" is a paltry 2 million additional homes across 8 years, with half of that covered by the provinces and municipalities, and that's if it actually goes to plan. If you're bringing in a million people every year.., the math ain't mathing, as the kids say. Even at their target of 500k, it seems like not quite enough.
As for temporary vs permanent, I'm not sure. I've known many temporary residents, all waiting around for PR, some staying long past their expired work permits: my friends and coworkers - good people, for sure, but they have to live somewhere. It also seems like no one really ever gets deported. Famously, you have to kill 16 people, but less anecdotally, the country is only deporting a few thousand a year, equivalent to a few days worth of immigration.
I have talked to a number of recent immigrants on dating apps, and a huge number are students or recent graduates of a very low ranked local university that I've never even heard of any local going to, and whose student body seems to be about 90% international students. I don't think it's bad enough to be called a diploma mill, but it's not good. It makes me doubt that we're really attracting the brightest people. The standards of the higher ranked universities themselves are dropping. All of these universities have a huge problem with cheating from what I've heard and the lower ranked ones have pretty low standards for passing.
I don't think the immigration rate should take the price of housing into account though. The average Canadian benefits from higher prices. The problem is that cities refuse to allow development. The median voter supports immigration but doesn't want his own neighbourhood to change. And they don't want urban sprawl either. But even if they doesn't happen, the average Canadian is still better off with high property values.
Yeah.. some of that is true.
My steelman for the government's actions is that they're doing what they feel is best for the country because something something Century Initiative. Country needs population to support its social program Ponzi scheme (and I mean that with love. Free healthcare is great, but it is expensive. So is OAS). It needs to be paid for with an expanding population's taxes, and where that population lives is not Ottawa's problem. It's not Trudeau's fault most of Vancouver still looks like this.
But no. I don't think the average Canadian benefits from higher home prices. The average voter? maybe. So then you have the PM just come right out and admit it. "Home prices cannot be allowed to fall". It's generational warfare, and our politicians have picked the side their votes come from. The boomers get to retire. You get to eat the bugs.
How can the average Canadian not benefit from higher property values if the vast majority of property is owned by Canadians?
It's not generational warfare. People are free to give the proceeds of higher property values to their children, and most of them do. It's not the government's fault if some people don't want to help their children. But when the government does intervene and artificially suppresses property values or taxes them to redistribute to the young, a large share of that is redistribution to immigrants or their children. This is the opposite of what the government should do if it wants to help Canadians at the expense of foreigners as so many claim it should.
"Generational warfare" was perhaps hyperbolic. I mean that the government is propping up assets that, absent their meddling, should come down in value, if things were at all sane like in the US.
It doesn't help the younger generation of Canadians now if their parents will eventually croak in 25 or 30 years and leave them the house (along with god knows what owed in deferred property tax. Have fun with that, kids! Edit: actually, maybe this is only a BC thing), nor does it help those who can't bank on an inheritance.
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