Canada’s Broken Housing Market & How to Fix It

Benjamin Tal explains why Canada’s housing market remains broken — even after prices have fallen.

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Now listen, you recently came out with a report about the real estate market, talked about how it’s still broken. I’ve said repeatedly on the podcast that when you had the falling prices in many areas, prices went down 20, 25% from the peak, in some cases a little bit more. The Niagara region, for example, it made it even less likely that the builders would get involved because they now had to compete with those lower prices, and of course they couldn’t make any money in doing so, and it compounded our supply problem in my mind going forward.

Am I right on that? And just talk a little bit about why you think the market is still very much broken.

Absolutely. The way to describe the housing market in Canada and especially in places like Toronto and Vancouver is the following. Units, houses are way too expensive to buy and not expensive enough to build, and that’s exactly the way I would describe the market. Listen to this. We have a situation in which, yes, prices went down by 20, 25%, but if you are a young couple, good luck buying a house.

We have a generation of Canadians who cannot even dream about owning a house. We all know the story. It’s a, an affordability crisis. At the same time, builders are not building because they cannot make money, and they are not a charity institution. They have to make money. The, the space is not there, so we are not building, we are not buying, and that’s why what we have to do urgently is to first, uh, cut the cost of buying, and that’s why we were fighting for cutting the GST and HST.

We won that war. That’s happening, and that will reduce the price significantly. That’s one thing. The other, we have to cut the cost of delivering houses, namely the cost of construction, and we know that the construction costs are down by about 15%. Interest rates are not in the sky. That’s good, but we needed something else because listen to this, Dave, 32% of the price of a unit in Canada is taxes.

32%. The only thing that we tax more is alcohol and tobacco.

No, it’s basically nutty. I mean, and you look at other places in the world, and a lot of Canadians don’t know this, that number in many areas is 7 to 9%, and we’re at 32 in Canada. So just think about the difference. It’s crazy. It’s like a 25% premium

exactly. It’s like a sin to build a house in Canada. We have to fix it. So we have a situation in which, uh, the government is now accepting the reality that we have to cut development charges, uh, and that’s very important. It’s happening already in, uh, Ontario. It will be happening in Vancouver and other places.

So this is just the beginning. We desperately need to cut the cost of delivering houses and to cut the cost of buying houses. We are starting to move in the right direction. For the first time, governments at all levels are accepting that, that this is not just people being greedy, it’s simply a crisis, and we have to fix it.