My Hot Take on Carney's Housing Policy

The Liberals reach into their toolbox and pull out the Crown Corporation

For those readers who don’t know this, recently Mark Carney announced a significant housing policy plank. For those not up to speed, here’s a link to a video introducing it.

In a nutshell, Carney has announced that if he wins the election he intends to create a 'war-footing level’ of government intervention to create 500,000 new homes every year in order to create an adequate housing stock and stimulate the economy. Moreover, he intends to do it in a way that cuts many of the barriers that currently prevent housing from being built quickly and cheaply.

Announcing "Build Canada Homes” (BCH)

The Liberal policy says that if they are elected they will create a new Crown Corporation (my words, not their’s) titled “Build Canada Homes” that would fill the gap left by decades of federal/provincial/municipal/private sector mismanagement of the housing file. It would be a government-run developer who’s goal is to create a new housing industry that is able to produce the housing people need at a price they can afford.

This new non-profit, government housing entity would be different from existing developers because its goal will be to create affordable housing—not make as much profit as possible.

It won’t just be a developer of ‘last resort’, though. As he describes it, one of the goals of the BCH will be to foster the creation of a whole new system for building homes. This would include helping develop factory-built housing techniques by making bulk buys—which will help businesses invest in productivity and train new workers for good-paying jobs.

Not only would the BCH have the advantage of not having to do any more than break even, it will also have access to surplus land held by the federal government, which will push down costs even further.

Other Parts of the Policy

In addition, the policy statement proposes solutions to other parts of the housing crisis. For example:

• the federal government will work with the provinces and municipalities to find ways to cut current development charges in half

• expand the housing accelerating fund to ‘nudge’ municipalities to cut their red tape

• various tax and incentive programs to encourage the creation of a wide-range of new housing of different types

• altering various parts of the building code that add needless cost to the final home

For more detailed information, take a look at the official policy statement.

The Cost

In addition to deferred taxes, the policy plank sets out the following figures:

• $25 billion in debt financing (ie: loans that are paid back) and an additional $1 billion in equity financing (ie: loans for part ownership that the business doesn’t pay back) for the prefab building sector—because prefab homes cost substantially less to build than using traditional techniques (up to 20% cheaper and 50% faster)

• $10 billion in low-cost financing directly aimed at building low cost housing

There’s really not a lot of sense in trying to drill down too deeply into this proposal because the ‘devil is always in the details’ and there’s always a difference between the policy suggestion meat and the legislative sausage that comes out of Parliamentary committee meetings. But having said that I’d like to draw reader’s eyes to what I think are the salient points:

• Carney’s plan recognizes that the real problem is we simply aren’t building enough housing, and that if we just make financing easier for people without adding to the housing stock all the government will be doing is pushing up prices even higher. That’s why he’s committing to building around 500,000 new homes per year.

• we also need to create new ways of building homes that are simply a lot cheaper than the existing methods—hence the investment in prefab, factory-built housing

• the feds need to continue ‘nudging’ both the provinces and municipalities to get them to change zoning so density will be allowed to rise in cities—which cuts down on the price of land as a fraction of housing cost

The reason why I’m so excited about this policy plank is it is the first time I have ever seen a politician—federal, provincial, or municipal—who seems to ‘get’ the size of the Housing Crisis and how much it we need to do to get out of the hole we have managed to dig ourselves into. We simply aren’t going to solve the Housing Crisis by fiddling around the edges of the tax code—we need mass-mobilization of the economy similar to what was done after WWII.

Investing Versus Spending

This point needs to be emphasized. People get all upset about the government spending. They should. But we need to understand the difference between spending and making an investment. As the cost of housing has increased, it sucks money out of the hands of poor people—which means our welfare, unemployment insurance, disability pensions, child tax credits, and minimum wages don’t go as far as they used to. It also sucks money out of the hands of young people in general, so they have less to invest in things like improving their skills and saving for their retirement. This has a pernicious effect on the entire economy.

Carney understands this point and sees how an smart investment in the economy that will stabilize and then cut the cost of housing will pay dividends by making the money that we already pay into social programs go farther. This is a government investment that stops the expansion of government costs.

All-in-all, this announcement gives me hope that Canada will finally get its ass in gear and actually fix the housing mess. A lot of people have expressed cynicism to me about this—and I understand why. But we aren’t going to get a good policy until someone actually proposes one. And frankly, I haven’t heard any other realistic statements on housing from politicians in the ten years or so that I have been following this topic.

Bringing Back “Socialism with Canadian Characteristics”

I made the point of calling Building Canada Housing a “Crown Corporation” because it seems like exactly the same sort of thing that Canada used to do whenever the market failed to deliver something that the government decided was a public good. The first thing that comes to mind for me is the Canadian National Railway. It simply didn’t make economic sense to build a railway across the country—but the government realized that we simply would not have a real nation unless we did that, so Parliament created a crown corporation and it got build. And Carney’s reference at the beginning of his short video is totally apropos, as anyone who read my article about how Britain and Canada moblized their economies in WWII would know.

Canada is different from the United States in that a great deal of our development took place because of government investment and subsidies. If memory serves, the first Hulet moved to Ontario from upstate New York in 1800 because the crown was offering land and financial help to new settlers, for example. I mentioned the CNR. There are many other examples I could cite (eg the CBC). Canadian government haven’t done a lot of “nationalization” of privately-owned, existing companies—but they have built a lot of new industries from scratch because the private sector wouldn’t. That’s what I mean by “socialism with Canadian characteristics”.

Since the neo-liberal consensus arose from the Thatcher/Regan/Mulroney axis of evil, we haven’t been doing much of this stuff because our leaders believed that integrating into the USA was the path to follow. We now know that this is a dead end. So I think it’s time for the country to go back to the old model. And it seems that Mark Carney just might be the man to lead us back to the old ways of doing things.

Moreover I say unto you, the Climate Emergency must be dealt with!