The federal government is aiming to make housing affordable for younger Canadians while retaining property value for existing homeowners, Prime Minister Justin Trudeau said in an interview with the Globe and Mail.
“Housing needs to retain its value,” Trudeau told The Globe and Mail’s City Space podcast last week. “It’s a huge part of people’s potential for retirement and future nest egg.”
However, some experts argue that may not be easy to do.
“His comments are extremely problematic,” John Pasalis, Realtor and broker at Realosophy Realty told Global News on Wednesday.
He added, “Very clearly, the government’s position is that it (housing) is an investment that needs to be protected. This is obviously the top priority in Canada. You can’t really have affordability when housing is viewed as an asset. Not only is it an asset for growing wealth, but an asset where that growth needs to be protected actively by the government.”
He added that Trudeau’s comments will likely rub younger Canadians the wrong way.
“The younger generation has been feeling that the system’s a little bit rigged against them. He confirmed it is, when you have them arguing that they’re going to try to keep home prices elevated.”
Robert Kavcic, senior economist with BMO Capital Markets, said there are three broad ways to bring more affordability into the housing market. The first is falling home prices and the second is lowering interest rates.
“The third way is you could see incomes grow. And incomes are growing. Unfortunately, it takes time to catch up to a period where you have house prices growing at 20 or 30 per cent per year, but that’s something that will happen gradually over time,” he told Global News on Wednesday.
Pasalis said the notion that housing can be made affordable without home prices falling is possible “in theory” but will take a long time to achieve.
“If prices don’t appreciate for the next 15 years and incomes do well, maybe you can get to affordability. But it’s very unlikely.”
However, Kavcic said the value might go up for single-family detached homes as the government pushes for more intensification.
“What ends up happening (with intensification) is you change the composition of the housing stock. So, you get a lot more smaller units, a lot more condo units. But as a share of the overall housing stock, single detached housing continues to shrink and it becomes scarcer and scarcer.”
He said as more millennials with one, two or three kids look for single-family homes, those prices could potentially continue to rise despite the overall housing stock increasing.
“That cohort that has a foot in the door of single detached housing in the big cities of Canada has built up a tremendous amount of wealth,” Kavcic said.