Housing nationalism reveals an ugly side to Canada’s affordability crisis

Houses for sale in Ottawa

Scapegoats non-residents for rising home prices and rents

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Housing affordability challenges have promoted reactionary nationalism in Canada, with the popular discourse and resulting policy responses scapegoating non-residents by holding them responsible for home prices and rents rising faster than median household incomes in urban centres.

This housing-driven nationalism has also motivated accusations of money laundering, additional transaction taxes, outright bans on non-residents’ residential purchases and a large increase in hate crimes against racial minorities in parts of the country.

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But despite the punitive measures, the housing market has not become any more affordable, forcing many to finally realize that a lack of sufficient housing construction over the past few decades has created an imbalance where higher demand and constrained supply continue to push prices upwards. This realization, however, was too late to prevent politicians, policymakers and talking heads from targeting racial minorities.

For example, while policymakers were erecting barriers against foreign homebuyers, they conveniently ignored the fact that Canadians own far more dwellings abroad than non-residents do in Canada, according to a recent paper by two Vancouver-based academics, Nathanael Lauster and Jens von Bergmann, in the Journal of Ethnic and Migration Studies.

The latest punitive taxation on non-residents is yet another proposal to impose a tax on foreign homebuyers in Toronto. The executive committee of Mayor Olivia Chow is reviewing a proposal by city staff to introduce a “municipal non-resident speculation tax” requiring non-resident buyers to pay an additional 10 per cent of the purchase price in transaction taxes. If approved, the tax will be implemented in January 2025 when the two-year federal ban on restricting non-residents from buying residential properties expires.

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City staffers defined the need for the new tax by drawing on a narrative steeped in reactionary housing nationalism. The proposal states the tax will “maintain a level of affordability in the residential real estate market by discouraging international buyers from purchasing property in the City of Toronto, particularly those buyers who do not intend to live in the property, or where the purchase is for purely speculative motives.”

This grand plan of maintaining affordability rests not on tens of thousands of home purchases, but a few hundred by foreign buyers. Consider that only 533 of the 27,769 homes sold in Toronto in 2022 were purchased by non-residents. In 2020, 606 of the 31,845 residential transactions were made by non-residents.

Staff estimate the tax could net $15 million in 2025 if the federal ban on non-resident purchases is lifted. The average home price of $1.06 million suggests that means about 150 purchases by non-residents per year in the future. The notion that preventing 200 or fewer sales to foreigners will restore or maintain housing affordability in Toronto is absurd.

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The proposal also makes unsubstantiated claims when it states that the proposed tax on foreign homebuyers will “safeguard and enhance the availability of residential housing supply.” Such a claim confuses housing supply, which represents new housing construction, with the notion that the proposed tax will push foreign homebuyers away, allowing local buyers to compete internally.

If the new tax reduces demand for housing, it will also likely discourage new listings, resulting in lower supplies in the resale market. This will be one unintended consequence of the proposed municipal tax.

The paper by Lauster and Bergmann systematically reviewed the villainization in British Columbia of non-resident buyers from China. After provincial and municipal taxes targeting non-resident buyers failed to bring prices down, the narrative switched to unsubstantiated accusations of money laundering, prompting the provincial government to form the Cullen Commission.

The commission’s findings unequivocally rejected accusations of foreign entities introducing laundered money into B.C.’s housing markets. The commission said “low supply, high demand, and low interest rates are the drivers of housing unaffordability in British Columbia — not money laundering,” and further warned that reactionary nationalism “vilifies ethnic or racial groups as responsible for a problem not of their making.”

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The City of Toronto and other governments across Canada must abstain from fuelling this dynamic and formulating policies that do little to improve housing affordability.

Millions of additional dwellings are needed to restore affordability. Cities can help by fast-tracking development approvals and abstaining from fanning reactionary nationalism.

Murtaza Haider is director of Regionomics Inc., a consultancy specializing in predictive analytics and machine learning. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website, www.hmbulletin.com.

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