An affordable housing crisis that is hurting the Canadian government's popularity will take years to resolve, even if construction hits an 80-year high, Finance Minister Chrystia Freeland said on Saturday.
An affordable housing crisis that is hurting the Canadian government’s popularity will take years to resolve, even if construction hits an 80-year high, Finance Minister Chrystia Freeland said on Saturday.
I work in construction and pretty much all I get to work on is huge luxury homes for people who own multiple homes. These projects take up huge amounts of construction labour resources. We are very busy but what we are building is not going to increase housing stock for working Canadians.
One of the biggest questions is whether she’s willing, as finance minister, to take on the Bank of Canada.
Monetary policy isn’t the only macroeconomic tool, and it’s one that should be coordinated with fiscal and other measures.
In this case, the inflation fighting interest hikes can be argued to be having a ‘perverse effect’ of keeping the housing stock tight without cooling demand while at the same time being completely ineffectual for the other major inflationary drivers of food and fuel.
Food inflation needs antitrust action, while fuel is a long term necessary adjustment to move the market away from fossil fuels. Interest rate hikes have nothing positive to contribute to those concerns.
The Bank of Canada isn’t constitutionally independent no matter how much certain previous governors have tried to make that case. It only has responsibility for one macroeconomic tool, and isn’t democratically elected, rather appointed by the executive.
The current governor of the Bank sounds increasingly like John Crown did in the early to mid 1990s when he put Canada into a deeper and deeper recession/depression because he placed inflation-fighting above all, and used the bank. He claimed however that no government should tell him how to manage monetary policy, and made speeches about the need for a constitutionally independent governor. Then, it took the electoral near eradication of the Progressive Conservative Party at the federal level plus the eventual exasperation of Paul Martin and Jean Chrétien to push Crow out.
Actually, the independence of central banks, or in other words the isolation of monetary policy from fiscal and interventions to counteract market failures, is not a settled or proven essential for developed economies.
A basic knowledge of dynamic macroeconomic theory and evidence shows that some level of coordination of monetary and fiscal policy is essential to avoid bad corner outcomes. That means coordination between the finance/treasury minister and the central bank.
Most of the time, independent monetary policy is fine to contain inflationary pressures, especially when most of them are externally driven in an open economy like Canada’s. But not always. In those cases, when fiscal and monetary policy move in opposite directions, the trajectory will be poor.
I don’t understand. Why do they need to “take on the bank of canada”? As you said, Monetary policy isn’t the only tool. Monetary policy is set by the bank of canada. The bank of canada is doing exactly what it is supposed to.
The government sets fiscal policy. Currently the government is in a spending frenzy, which is counter to the Monetary policy.
Indeed. Central banks in developed nations act independently of the government for good reasons. What the GP is suggesting, which is government interference on the central bank to lower interest rates, is the scenario that causes developing nations like Turkey to experience runaway inflation. It is a terrible idea with plenty of historical precedents.
Yes. I agree with you. I think that’s an awful idea. It wasn’t clear what the poster was suggesting, which is why i asked for clarification.
He asks whether the government will interfere with the BoC, but then says that is only one tool. Then suggests the BoC is incorrect with raising rates since housing prices are not dropping.
Again, the BoC is doing exactly what it is supposed to. The government is failing to address the other issues, which really isn’t a BoC issue.
Maybe Chrystia had speed her car on over here and we can show her the state of the homelessness and rent rates here in Alberta (which is supposed to be the “wealthiest” province, but that money we get from oil goes directly back to… oil)
We need to make out cities and towns more family friendly.
Almost all new buildings in north america prioritize bachelor’s units 1 and 2 bedroom units. Trying to find a well priced 3 or 4 bedroom in a “lively” downtown center, close to transit and work, with plenty of schooling in the area is almost impossible.
Instead most new buildings going up seem to be prioritized towards investment as opposed to long term living.
Here’s a good article talking about why developers don’t provide adequate family units.
This. My wife and I, as a household unit, are apparently top 7-8% in terms of yearly earnings. 3-4 bedroom houses are out of our reasonable budget in Montreal and surroundings. Some people have told me I’d qualify for a duplex and could just live in the first and rent out the second unit, but I’m not interested at all in contributing to this trend of increasingly commodifying access to housing. I’d buy close to town, but with the current market and rates, the payments would be insanely high. So I could maybe buy super far from town, but then I’m putting all my faith into being able to work mostly remotely forever, as most jobs in both of our fields are either in or around Montreal.
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I work in construction and pretty much all I get to work on is huge luxury homes for people who own multiple homes. These projects take up huge amounts of construction labour resources. We are very busy but what we are building is not going to increase housing stock for working Canadians.
They have no interest in addressing this problem. Let’s be real.
If they did, they would have started years ago.
We’ve tried nothing and we’re all out of ideas
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Freeland: Too little, too late ¯\_(ツ)_/¯
One of the biggest questions is whether she’s willing, as finance minister, to take on the Bank of Canada.
Monetary policy isn’t the only macroeconomic tool, and it’s one that should be coordinated with fiscal and other measures.
In this case, the inflation fighting interest hikes can be argued to be having a ‘perverse effect’ of keeping the housing stock tight without cooling demand while at the same time being completely ineffectual for the other major inflationary drivers of food and fuel.
Food inflation needs antitrust action, while fuel is a long term necessary adjustment to move the market away from fossil fuels. Interest rate hikes have nothing positive to contribute to those concerns.
The Bank of Canada isn’t constitutionally independent no matter how much certain previous governors have tried to make that case. It only has responsibility for one macroeconomic tool, and isn’t democratically elected, rather appointed by the executive.
The current governor of the Bank sounds increasingly like John Crown did in the early to mid 1990s when he put Canada into a deeper and deeper recession/depression because he placed inflation-fighting above all, and used the bank. He claimed however that no government should tell him how to manage monetary policy, and made speeches about the need for a constitutionally independent governor. Then, it took the electoral near eradication of the Progressive Conservative Party at the federal level plus the eventual exasperation of Paul Martin and Jean Chrétien to push Crow out.
Actually, the independence of central banks, or in other words the isolation of monetary policy from fiscal and interventions to counteract market failures, is not a settled or proven essential for developed economies.
A basic knowledge of dynamic macroeconomic theory and evidence shows that some level of coordination of monetary and fiscal policy is essential to avoid bad corner outcomes. That means coordination between the finance/treasury minister and the central bank.
Most of the time, independent monetary policy is fine to contain inflationary pressures, especially when most of them are externally driven in an open economy like Canada’s. But not always. In those cases, when fiscal and monetary policy move in opposite directions, the trajectory will be poor.
I don’t understand. Why do they need to “take on the bank of canada”? As you said, Monetary policy isn’t the only tool. Monetary policy is set by the bank of canada. The bank of canada is doing exactly what it is supposed to.
The government sets fiscal policy. Currently the government is in a spending frenzy, which is counter to the Monetary policy.
Indeed. Central banks in developed nations act independently of the government for good reasons. What the GP is suggesting, which is government interference on the central bank to lower interest rates, is the scenario that causes developing nations like Turkey to experience runaway inflation. It is a terrible idea with plenty of historical precedents.
Speaking of that terrible idea: https://www.cnbc.com/2023/09/15/trump-bemoans-high-interest-rates-and-indicates-he-might-pressure-fed-to-lower.html
He’s done it before and he promises to do it again. The absolute genius /s
Yes. I agree with you. I think that’s an awful idea. It wasn’t clear what the poster was suggesting, which is why i asked for clarification.
He asks whether the government will interfere with the BoC, but then says that is only one tool. Then suggests the BoC is incorrect with raising rates since housing prices are not dropping.
Again, the BoC is doing exactly what it is supposed to. The government is failing to address the other issues, which really isn’t a BoC issue.
Yes, we are in agreement. I was supporting your thesis.
Maybe Chrystia had speed her car on over here and we can show her the state of the homelessness and rent rates here in Alberta (which is supposed to be the “wealthiest” province, but that money we get from oil goes directly back to… oil)
Gee Cyn, why didn’t you start years ago then
We need to make out cities and towns more family friendly.
Almost all new buildings in north america prioritize bachelor’s units 1 and 2 bedroom units. Trying to find a well priced 3 or 4 bedroom in a “lively” downtown center, close to transit and work, with plenty of schooling in the area is almost impossible.
Instead most new buildings going up seem to be prioritized towards investment as opposed to long term living.
Here’s a good article talking about why developers don’t provide adequate family units.
https://www.centerforbuilding.org/blog/we-we-cant-build-family-sized-apartments-in-north-america
This. My wife and I, as a household unit, are apparently top 7-8% in terms of yearly earnings. 3-4 bedroom houses are out of our reasonable budget in Montreal and surroundings. Some people have told me I’d qualify for a duplex and could just live in the first and rent out the second unit, but I’m not interested at all in contributing to this trend of increasingly commodifying access to housing. I’d buy close to town, but with the current market and rates, the payments would be insanely high. So I could maybe buy super far from town, but then I’m putting all my faith into being able to work mostly remotely forever, as most jobs in both of our fields are either in or around Montreal.
I’m also a top earner and this market is just freaking stupid. No way am I going to ruin myself just for a 4bedroom place for my family and me.
The way things are going, we’re gonna ruin ourselves with rent eventually too lol
Well, it’s taken over 30 years to develop so that claim tracks.
If they do nothing for another 50 years I wonder if it will still take years to fix.