Canada has become a hostage of its own housing bubble |
View looking south over Edmonton’s downtown core. Photo by Jeff Wallace/Flickr.
At the beginning of the millennium home prices began rising faster than incomes. As time went on, housing became less and less affordable. When the global financial crisis hit in 2008 real estate values continued their rapid growth even as markets crashed in the United States and Britain. For a quarter-century rising housing costs outpaced wages, pricing out generations of Canadians and pushing thousands into homelessness.
What would it take for home-price-to-income ratios to return to the level of the early aughts? What would need to happen for housing to become affordable again?
International case studies and examples from our own history show that a return to affordability will require massive investments in publicly and cooperatively owned housing totalling somewhere between 20-40 percent of all homes in high-rent cities. It will also require pro-renter policies like effective rent control and meaningful landlord regulation.
This kind of decommodification campaign would lower housing costs, but its unintended consequences would reverberate across the country. Falling housing prices means shrinking pensions, broken nest eggs, and negative equity for anyone with an expensive mortgage. The nation has grown around housing speculation the way a tree grows around a rusted fence post—its presence warps the growth but removing it now could split the trunk.
Over one million households bought their homes at peak prices; any significant decline in value would leave those families owing more than their house is worth. Analysts have said that a 10 percent drop in home prices could increase homeowners’ negative equity by $10 billion. A 30 percent drop puts Canadians $46 billion underwater on their mortgages. For people who scraped together enough money to buy into the market at record high prices, falling property values would have them paying debts well beyond the........