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Will anyone ever be able to afford a home?
Housing mania is gripping the United States and Canada – with millions wanting but unable to find an affordable place to live.
For years, both countries have faced a growing housing crisis. The pandemic exacerbated the struggle, and only now are governments starting to take the problem seriously. Still, securing affordable housing remains a daily struggle for would-be buyers, renters, and a growing number who are either homeless or under-housed.
In February, the median home price in the US actually fell to $400,500, a decline of 7.6% annually, but housing remains unaffordable for the majority of the country. In December, a mere 15.5% of homes were considered affordable (mortgage payment no more than 30% of monthly income). A recent poll found that around half of aspiring buyers said they can’t afford a down payment and closing costs, though a mere 13% of would-be buyers said there was “nothing” keeping them from buying. This suggests that even those who might be able to afford a down payment face other challenges in the market. High mortgage rates, around 7%, “historically” low stock, and a lack of targeted rental and non-market units are keeping homes out of reach for Americans.
With homebuilders waiting on lower interest rates to initiate new builds, pressure on the market may grow in the short term. Housing starts were down in March, nearly 15% below February and 4.3% lower than a year ago.
In Canada, it’s even worse. Last month, the benchmark price was a whopping CA$720,000, up 2% over February with mortgage rates hovering between 5 and 6%. Homeownership now costs nearly 63% of the median household income, up from 35% in 2002.
High housing costs are also driving up inflation – as in the US – and the country also faces a supply shortage. In 2022, the Canada Mortgage and Housing Corporation said the country would need 5.8 million new homes by 2030 to reach affordability. Yet, new builds fell in March, down 7% from February, and the six-month trend is also down, which means the country isn’t building nearly enough housing. There is one exception: British Columbia, with starts up 27% in Vancouver, as the province pushes new builds through a series of measures, including zoning reform to push beyond a focus on building single-family dwellings and pro-density minimum building requirements.
Why are houses so expensive?
Prices are high thanks to high demand and low stock, as usual, but there’s more to it. There’s also a lack of political action to build or encourage the building of housing people need where they need it – for instance, non-market units, purpose-built rentals, multiplex units – which is keeping stock low for segments of the population, including younger buyers and lower-income earners.
Ottawa ceased its involvement in building social housing in the 1980s and 1990s, which hasn’t helped. The US has long been a laggard on social housing, though in recent years some municipalities are starting to build publicly owned units.
Exclusionary zoning – or “not in my backyard” NIMBY-ism – has been another hurdle in both countries, with cities fighting the density necessary to build at scale and homeowners keen to protect their home values by keeping new housing out. A jump in the number of newcomers in Canada, about 471,000 last year, also contributes to market pressure.
Labor shortages are also hampering new builds in both Canada and the US, with the latter still slowed by the legacy of the Great Recession, which did more damage stateside than up north.
And then there’s the elephant in the room: the financialization of housing through which big institutional investors dominate the market looking for returns on their capital. This pernicious problem stems from seeing houses as assets first and foremost, a source of maximized profit, which invites speculation and market dominance by institutional investors who seek to inflate prices. Smaller investors, meanwhile, simply buy and flip properties.
Thinking of housing as an asset also means that individuals may see their homes as investments for retirement. Housing policy expert Carolyn Whtizman says “since the 1970s, the federal government has been treating housing, particularly ownership housing but more recently multifamily apartments, as the primary investment vehicle for retirement.”
“Housing in the US has always been an asset for the middle class,” says Noah Daponte-Smith, an analyst at Eurasia Group. “Your house is your primary retirement savings vehicle.”
Housing investors and those who rely on their homes for retirement planning want, even need,higher prices, which leaves millions priced out of the market or stretched to the brink.
In Canada, the share of investors and repeat buyers in the market has risen precipitously compared to first-time buyers, with investors accounting for 30% of purchases last fall. In the US, first-time buyers make up a similar share of the market at 32%, and recent data suggests institutional investors could make up as much as 40% of the single-family detached home rental market in the next five years or so, which means higher prices for renters and buyers alike.
What’s going to make housing affordable?
Solving the housing crisis will take years of commitment to a number of measures. Whitzman says Canada needs a period of stable house prices and rising incomes to produce an affordable market, but it also needs government involvement in building or incentivizing stock that matches the needs of buyers and renters at various price points. The same is true in the US.
The other side of the equation is income – namely, people need higher salaries. Half of Canadians now live paycheck-to-paycheck, and a whopping 78% percent of Americans are in the same boat, which leaves no room for saving for a down payment.
Stabilizing requires efforts and cooperation by governments at the national, state/province, and local levels. One approach could be ending the capital gains exemption on the sale of a principal residence to dampen demand, just as, according to Paul Kershaw of Generation Squeeze, taxing home wealth and using the cash to build affordable housing would have a similar effect while increasing stock.
What’s being done now?
In recent years, and especially in the last few months, the Trudeau government has awoken to the need to go all-in on housing. Its 2023 Housing Accelerator Fund helps municipalities build homes, trading federal cash for national building goals, including upzoning, transit accessibility, and affordability. The fund is expected to generate 750,000 new builds in the next 10 years, and so far the feds have greenlit 179 local applications.
In Canada’s federal budget, tabled on Tuesday, the government committed to several measures focused on housing affordability to build what it says will be 4 million homes by 2031. Those include longer mortgage amortization periods, $15 billion for construction loan programs, $6 billion in infrastructure funding, and buyer tax breaks. It also promised to “restrict the purchase and acquisition of existing single-family homes by very large, corporate investors,” but those details are to be determined in the fall after consultations, and the promise itself is full of asterisks, such as “existing” and “very large.”
Stateside, Daponte-Smith points out that while there is a housing crisis, “especially in major metro areas,” no national housing strategy exists. Instead, housing policies are “determined at the state and really even at the local level,” which means that every builder has to deal with a different set of local laws and zoning codes that control what they can build and how expensive it will be.
The Biden administration is increasingly aware that it needs a housing strategy. In March, the White House announced the latest in its housing affordability plan, which includes pressuring Congress “to pass a mortgage relief credit” worth $5,000 a year over two years along with $25,000 as a cash grant for down payment assistance for first-time buyers. On the supply side, the administration is also calling on Congress to boost new builds with builder tax credits and announced grants for new builds of affordable units for buyers and renters.
Electoral consequences?
Both governments are under pressure to deliver affordable housing but are hampered by long timelines, limits on labor and capital, the need to cooperate and coordinate across levels of government, and views that housing is an asset rather than a human need.
Voters expect the Biden administration, Trudeau government, and their state/provincial and local governments to deliver, and they’re increasingly impatient – meaning they may punish those that don’t at the ballot box.
With both Joe Biden and Justin Trudeau facing voters in November and by the fall of 2025 respectively, you can expect both men to continue working on housing affordability – to get first-time buyers into the market and rents down for those unable or uninterested in buying. But they’ll be battling an intransigent market that serves investors and incumbents, and the fact that even in the best-case scenario there will be a lead time between better housing policy and good outcomes at scale.
President Joe Biden speaks as he announces a new plan for federal student loan relief during a visit to Madison Area Technical College Truax Campus, in Madison, Wisconsin, on April 8, 2024.
The battle for Gen Z
With President Joe Biden and Prime Minister Justin Trudeau facing upcoming elections, the battle is on to capture young voters. Biden will face former President Donald Trump next November, and the next Canadian election is due by the fall of 2025, but both contests are already underway. Younger folks in both countries are turning increasingly sour on the status quo as they face affordability challenges and feel left behind.
Trudeau has expressly said his government was focusing on Gen Z and millennials, “restoring fairness for them.” And on Tuesday, his government unveiled its “Gen Z budget,” going all in on measures for parents with younger children (new cash for childcare and a school food program), students (interest-free student loans), and housing policy aimed at opening space in the market for younger buyers who’ve been shut out in recent years (with a first-time buyer, 30-year mortgage amortization period and tax breaks for home purchases).
In the US, young voters are focused on affordability, abortion rights, the environment, and student debt, and Democrats will need those folks to turn out on Election Day if they hope to retain the White House and make gains in Congress. Those 43 and under are frustrated with the housing market. Democrats are working to get on abortion rights on the ballot in key states, and the Biden administration is touting the impact of its Inflation Reduction Act on the environment. The president also hopes efforts to eliminate student debt will help alleviate some cost-of-living concerns for young voters.
But Biden is also facing a backlash from Gen Z voters over Gaza and US funding for Israel. The president had hoped tougher talk on Israel would boost his reelection bid, but that’s been complicated by Iran’s attack – although the administration has told Israeli Prime Minister Benjamin Netanyahu that it won’t support reprisals against Iran.
Both Biden and Trudeau need younger voters to turn out to vote for them. In 2016, Biden dominated the Millennial and Gen Z vote by about 20 points over Trump. And while Canada’s Liberals managed a minority government in 2021 with a youth vote that was likely a near-split with the Conservatives, younger voters played a crucial role in Trudeau’s 2015 majority government victory.
This means the coming months will see increasing efforts focused on wooing younger generations.
Houses are seen under construction in a neighbourhood of Ottawa, Ontario, Canada.
Betting big on housing
Justin Trudeau’s Liberal government is going all-in on housing. The government has been rolling out announcements ahead of the official budget drop on April 16, a departure from the tradition of politicos trying to keep a tight lid on plans.
This week, as the country grapples with a housing affordability crisis, the government announced CA$6 billion in funding for home building and municipal infrastructure. But a few provinces, including Alberta and Ontario, pushed back, complaining about the strings attached to some of the cash, which would require provincial governments to permit builders to put up fourplexes without needing special approval.
Alberta is complaining the feds want to “nationalize” housing, which is a provincial constitutional responsibility, but a policy area in which the national government has been involved for decades.
On Thursday, Trudeau announced another $1.5 billion to protect and extend affordable rental stock, which is desperately needed in a country, where the average one-bedroom apartment goes for nearly $2,200 a month.
Stateside, the General Accounting Office said last year that the country was facing a shortage of affordable housing that’s been a growing supply since the early 2000s – and a broader supply shortage that isn’t helping matters.The average rent in the US is now just under $2,100 a month. But Congressional fights over funding have led to limited cash for making affordable housing more prevalent.
The dog, Bobi, that broke the record for oldest dog ever at 30 years-old, is pictured at Conqueiros, in Leiria, Portugal, February 4, 2023.
Hard Numbers: Dog title temporarily revoked, Young Irish adults live with parents, Russian air travelers live in fear, Houthi strikes crush cargo
⅔: Ireland is suffering from a serious housing crisis. Rents are so high that some two-thirds of Irish young adults live with their parents, which is nearly 20 points higher than the EU average. Experts blame a failure to invest in social housing and an overreliance on market solutions, which created incentives for developers to build luxury or short-term rental properties rather than lower or middle-income housing.
8: Russia’s commercial airline industry is hitting some serious turbulence. In the first eight days of December, according to a new report, Russian civilian airliners suffered at least eight separate serious mechanical failures. The rash of incidents is part of a wider problem: Western sanctions preventing the delivery of parts and service to Western-made aircraft in Russia are causing Russia’s commercial fleets to fall apart,
65: Houthi airstrikes on commercial ships navigating the Red Sea have caused cargo volumes through that waterway to fall 65% from normal levels. On Tuesday, even after two rounds of US-led airstrikes on Houthi targets, a Houthi missile struck a Greek-owned ship off the Yemeni coast. The Houthis say they’ll stop when there’s a cease-fire in Gaza, a call echoed by Qatar’s prime minister on Tuesday at Davos. (See our explainer on why Qatar is a small country with big influence these days.)Up up and away: Will skiers see more or less snow at Whistler this year?
Hard Numbers: El Niño messes with snow, US shutdown looms again, Toronto developers pause condos, climate report calls out Canada
8: It’s that time again … for shutdown roulette! The US Congress has just 8 days to pass a fresh stopgap measure to fund the federal government beyond Nov. 17, when the current money runs out. Mike Johnson, the newly elected speaker of the GOP-controlled House, said Wednesday that he would decide by the end of this week what he will seek to do. Johnson’s predecessor, Kevin McCarthy, was ousted last month by far-right GOP members who objected to the spending compromises that he’d reached with President Joe Biden.
14,000: Even as Toronto suffers the broader Canadian housing crisis, developers in the city have delayed launching almost 14,000 units as high-interest rates continue to depress demand among pre-construction buyers. At the same time, the national government pledged this week to build close to 30,000 new units on federal lands by the end of the decade.
110: A new UN report says that major energy-producing countries are on track to produce 110% more fossil fuels in 2030 than they are supposed to if the world intends to limit global warming to 1.5 degrees Celsius above pre-industrial averages. Canada is a big part of the problem: It shows the fourth-largest production increase in the world during that time period. The US came in second behind only Brazil among the climate policy scofflaws.Marc Miller, Minister of Immigration, Refugees and Citizenship, hands small Canadian flags to 53 new Canadian citizens representing 22 diverse nations, as they embark on their citizenship journey during a special ceremony at Canada Place, on Oct. 12, 2023, in Edmonton, Alberta.
Support for immigration fades in Canada
While political tension around immigration in Canada is nowhere near as intense as in Washington, there are signs that may soon change. Canadians’ traditionally strong support for high levels of immigration is slipping, according to a long-running tracking poll, putting pressure on Ottawa to stop letting so many people in.
Forty-four percent of Canadians now think that levels are too high, up from 27% last year, the largest change in sentiment that pollster Environics has observed in more than 40 years of tracking the issue.
The Trudeau government has dramatically increased immigration numbers, last year announcing plans to admit as many as 500,000 people, up from 300,000 a year when Trudeau took power in 2015. Those numbers are on top of record numbers of foreign students, temporary foreign workers, and an unknown number of undocumented workers.
There has long been a broad consensus in Canada about the economic benefits of immigration, but as housing becomes more costly – a recent report says Canada needs 3.45 million new homes – the consensus is eroding. Housing costs have skyrocketed and are expected to get worse. Increased borrowing costs are causing “payment shock” when mortgages come up for renewal and are also making new housing projects more expensive for developers.
On Wednesday, Immigration Minister Marc Miller revealed that the Canadian government intends to stop increasing the number of newcomers, leveling them out at 500,000 a year. Miller said earlier in the week that Canada would pay an economic price if it reduced immigration levels.
Under pressure from the opposition Conservatives, Justin Trudeau’s Liberals are scrambling to convince municipalities to ease zoning restrictions and get more housing built, but it is not going to happen fast enough to deal with the crunch.
Compared to the United States, Canada’s immigration debates tend to be muted because all parties rely on new Canadian voters to win elections. Almost a quarter of all Canadians were born in another country, compared with just 14% in the United States. That means that anti-immigrant messages are electorally risky.
There are also not the same kind of worries about massive numbers of illegal immigrants as in the United States, where Republicans are putting steady pressure on Joe Biden to do more to stop migrants along the southern border. That ongoing headache may soon get worse for the US president, as a caravan of 7,000 heads to the border.
Migrants share space at a makeshift shelter in Denver, Colo., on Friday, Jan. 13, 2023.
Migrant and housing crises hit both sides of border
The city has more than 1,868 migrants in shelters – a big jump from July and August, when numbers were in the 400-500 range.
In May, Title 42 expired. US officials expected a sharp, sudden rise in the number of immigrants entering the country from the southern border, and that is exactly what happened, though numbers later declined. The immigration policy had been in place since the Trump years, keeping hundreds of thousands of would-be newcomers, including some asylum-seekers, from entering the country.
The change prompted some states to ask the Biden administration for funds to help house migrants, but support has been insufficient. Now, as Politco reports, a broader battle over “NIMBYism” (not in my back yard) is playing out. Some officials, including Democrats, worry about how a rise in migration is affecting housing – many cities and states are already in crisis as shelters exceed capacity – and whether it might produce a local backlash. Massachusetts alone has upwards of 22,000 people in shelters, roughly half of whom are migrants. That’s a 100% rise since January.
National, state, and local support has been unable to keep up with the rise in newcomers, and migrants are finding themselves caught in the middle of a partisan political struggle ahead of the 2024 election. This comes as the US faces a growing housing crisis.
Meanwhile, in Canada, government under-funding and finger-pointing in this summer led to an emergency in which civil society groups and churches stepped up to feed and shelter migrants who were sleeping on the streets of Toronto. In September, the migrants moved to a shelter. The federal and Ontario governments eventually stepped up to offer funds to supporting asylum-seekers, refugees, and at-risk people. But the money won’t be enough for long, especially since Canada’s housing crisis shows no signs of abating.
With elections around the corner for both countries, leaders on both sides of the border will be under pressure to speedily address housing prices and growing shelter occupancy, particularly as migration picks up. We’re watching to see how national and local leaders navigate this growing crisis and fight to resist a local backlash.
Is the clock ticking on Biden and Trudeau?
It’s worse in the US, where every elected official seems to be raising money and running for reelection all the time, but leaders north of the border feel the pressure, too.
With President Joe Biden set for a reelection bid in November 2024 and Prime Minister Justin Trudeau due to meet voters by October 2025 at the latest, the already frenetic pace of electoral politics is picking up in both countries.
A pendulum swing may be in the works
Right-wing candidates in both countries aim to unseat the progressive incumbents, which means Biden and Trudeau face stiff competition. Biden’s chances, at the moment, seem far better than Trudeau’s despite some recent polling that may be giving the Democrats cause for pause – or maybe not.
Earlier this week, an ABC/Washington Post poll showed Biden’s approval rating at just 37%. What’s more, it found Donald Trump, the probable Republican nominee, leading Biden 51 to 42.
The poll, however, was such an outlier that even the pollsters who ran it recognized it as such. Criticism followed, and it’s safe to say that it is almost surely not an accurate representation of the electorate. Most polls show a much closer race, with Trump and Biden tied or within a few points of each other.
The picture in Canada is clearer. Trudeau is gunning for his fourth election win in a row – something that hasn’t been done by a prime minister in Canada in over a century – but opposition leader and head of the Conservative Party Pierre Poilievre leads by a lot. Poilievre stood out in a recent poll that found 40% of Canadians think he’d be the best prime minister compared to 31% who chose Trudeau. Canada is a multiparty democracy, so hitting 40% with several leaders on option is a strong showing.
Federal polls in Canada have the Conservatives up by four points on average, with some individual polls showing them up by double digits. According to 338 Canada, which tracks polls and models electoral projections, Poilievre’s side currently would stand to win 174 seats compared to 105 seats for the Liberals, which is enough for a majority government. The Conservatives are currently showing a 96% chance of winning the most seats.
Economic, aging, and legal matters
In the US, voters are expressing concern about both Biden and Trump – they aren’t exactly thrilled with their presidential options. A recent NBC poll echoes the ABC/Washington Post poll’s assessment of Biden’s flagging approval rating. It also shows that fewer than 40% feel Biden is handling the economy well despite job growth and the country heading for a soft landing. People are still feeling significant economic pressure.
Nonetheless, Biden might be safer on the economy than a quick glance suggests, especially since economic hopes are on the upswing. Clayton Allen, US director for Eurasia Group, says “The economy is doing just well enough for Biden.” He points out there’s just enough optimism out there with people’s personal economic outlooks that there’s “some positive sentiment among voters around the economy.” If things keep improving, such as the declining probability of a recession and the Fed’s ability to hold interest rates steady, that will boost Biden’s chances in 2024.
But any recent good news for Biden on the economy has to be tempered by the risk that economic sentiments take a turn. Recent numbers show optimism softening.
Beyond pocketbook issues, however, the electorate is also concerned by the candidates’ ages. According to NBC’s poll, a combined 74% have major or moderate concerns about the president’s “necessary mental and physical health to be president for a second term.”
Biden is 80 years old. Trump is 77.
Trump is also facing multiple indictments and was just found to have committed fraud in New York state. The NBC poll found that 62% of respondents had major or moderate concerns about Trump’s many legal woes.
Media coverage of the two is shaping a 2024 election narrative that is priming voters to evaluate each candidate on particular metrics. “The narrative around Biden has been for quite a while that his age is the most important factor for assessing his fitness for office,” Allen says. The one about Trump “has focused on his legal challenges and his position in the party.” The looming showdown for 2024 seems to be Biden’s age and fitness versus Trump’s (un)lawfulness.
In response, the White House has crafted a plan – parts of which pre-existed recent polling – to keep Biden fit and, just as importantly, looking fit. Of note, Democrats have had a recent run of favorable election results, which could serve as a proxy for the upcoming presidential race, suggesting an edge for Biden over Trump.
Canada focuses on affordability
Canadians are expressing their own fatigue with the current leadership and economic frustrations, particularly on housing and affordability. In recent weeks, the Trudeau government has gone all-in on the housing file, removing the sales tax from the construction of purpose-built rental units. They’ve also made a push to “stabilize” the cost of groceries – which grew 8.5% year over year in July. Food prices have been a significant issue in the country.
The government seemed to be gaining some traction on affordability issues of late – concerns that will determine the outcome of the next election. But events conspired last week to shift the national focus and some of the government’s attention.
Trudeau’s allegation last week that India assassinated a Canadian on Canadian soil shocked the country and the world. Days later, during a visit to address parliament by Ukrainian President Volodymyr Zelensky, the speaker of the House of Commons, Anthony Rota, welcomed a World War II veteran in the gallery who “fought for Ukrainian independence against the Russians.” He noted the man was a “Canadian hero” and a “Ukrainian hero” before the chamber, including Trudeau and Zelensky, and the chamber gave him a standing ovation. But it turns out that the veteran in question was in a Nazi SS division.
Rota has since resigned, and while Trudeau had nothing to do with the scandal, Conservatives are blaming him for the debacle – and there’s a good chance some voters will, too. This was the last thing Trudeau needed, particularly since questions about whether he can even last until 2025 are already circling. An August poll found a majority of Canadians thought he should go ahead of the next election.
With more than a year to go before the presidential election and as many as two years before a Canadian contest, no outcome is guaranteed. Elections matter, and the time ahead of them leaves plenty of opportunities for events and shifting fortunes to do their thing. Plus, not everyone has made up their mind.
“Polling this far out from the general election is inherently compromised,” notes Allen. “People are still very much deciding what their position is going to be, especially voters who are persuadable to either side.” This is true on both sides of the border, but current numbers suggest that by 2025, we’re more likely to see Biden in the White House than Trudeau in the prime minister’s chair.
The pendulum may end up swinging, but Biden stands a better chance of holding on for another term.