THE CANADIAN HOUSING MANIFESTO
The answer to the Canadian housing crisis
by Ryan Ivanov
This essay is dedicated to the thousands of homeless people of Canada, and all those who, because of the current crisis, cannot afford to own a home.
Introduction - The Problem - The Solution - The Costs - The Recommendations
INTRODUCTION
A spectre is haunting Canada – the spectre of the housing crisis. All the powers of old Canada have entered into an unholy alliance to exorcise this spectre: political leaders from right and left, provincial and federal governments, foreign and domestic investors.
And thus it has become a truth universally acknowledged that everything in Canada revolves around real estate. In the past it could have been hockey, maple syrup, cold winters, or even multiculturalism. But that was in the distant past.
Here are some other truths: housing prices are on the top of the list of issues facing all Canadians, disproportionately affecting young Canadians. Affordability has affected Canadians in terms of decreasing life satisfaction and decreasing fertility rates. The last available Stats Canada commentary shows that in 2021, 43% of young adults (20-29) lived with at least one parent. At the same time, 18% lived with roommates. [1] These statistics do not take fully into account the post-Covid inflation. The true statistics are much worse, and increasingly so.
A recent major report from the National Bank re-introduced the term “population trap,” and concludes that Canada lacks the infrastructure and capital stock to “adequately absorb current population growth and improve our standard of living.” [2]
Canada, in 2024, has gone back in time to Malthusian concepts from the 18th century. [3]
Political leaders, pundits and angry Canadians have been offering solutions from all ideological angles with colorful tweets and photo-ops.
“Build more houses!”
“Restrict immigration!”
“Hike the interest rates!”
“Lower the interest rates!”
“Burn the landlords!”
“Ban the speculators!”
“Target the gatekeepers.”
Increasingly, for many Canadians, the solution is simply to… emigrate. [4] In December 2023, Better Dwelling determined that based on Statistics Canada reports that in the third quarter of the year, Canada experienced the fourth-largest flight of people in 73 years. [5]
And, of course, the 2024 federal budget makes housing a central focus. It has lofty goals:
Budget 2024 and Canada's Housing Plan lay out the government's bold strategy to unlock 3.87 million new homes by 2031, which includes a minimum of 2 million net new homes on top of the 1.87 million homes expected to be built anyway by 2031. Of the 2 million net new homes, we estimate that the policy actions taken in Budget 2024, Canada's Housing Plan, and in fall 2023 would support a minimum of 1.2 million net new homes. [6]
The federal plan speaks of “turbocharging the construction of new homes across the country because the best way to bring down home prices is to increase supply—and quickly.”
Unfortunately, history has shown that no government has a magic wand to increase supply of anything quickly, be it homes, ammunition for war, or human talent.
In our Canadian Model, we propose three simple, inexpensive, and effective policy changes that will create a high-trust society based on community living.
These steps will solve the Canadian housing affordability crisis by fundamentally changing the way Canadians and, importantly, others, view the Canadian real estate market.
Only such a high-trust and transparent society will be able to innately counterbalance the view of housing as a predominantly investment vehicle or capital shelter.
THE PROBLEM
The desirability and commoditization of Canadian real estate have resulted in a dire affordability crisis. Our market is open to the world at large. This has affected our productivity, capital deployment and social cohesion.
Proposed solutions to date are characterized as focusing on controlling demand and supply.
In the case of demand, the solutions seek to reduce the pool of potential buyers. The solutions have been proven trivial to defeat and unpalatable to enforce.
In the case of supply, the solutions seek to harness non-existent resources (e.g. capital, labour and human will) and navigate federal, provincial, and municipal jurisdictions. But a responsible democratic government in the 21st century cannot simply marshal a World-War-Two-style war economy in order to build infrastructure or wall itself off from immigrants and global capital.
The fundamental issue at hand is that the desirability of our real estate as an asset is based on Canada’s status as a safe, welcoming, inclusive, diverse, and ever-growing country where capital can be parked without too many pesky questions; it can only be expected that people in Canada and around the globe would want to invest in such an asset. And there are many cultural reasons for small and large investors in Canada to hold real estate and distrust capital markets.
We argue that the cause of the unaffordability crisis is the commoditization of real estate which cannot be solved by top-down demand or supply solutions.
Our model addresses this fundamental problem by enacting policies that focus on building a high-trust cohesive society first.
THE SOLUTION
The Canadian Model is the implementation of three simple, inexpensive, and effective policy changes which create the foundation for a high-trust society based on community-living which will organically and innately counterbalance the view of Canadian real estate as an investment vehicle open to the world at large.
Our model is based on the following proven principles of transparency, accessibility, and accountability.
Transparency
All Canadian real estate ownership must be public.
Every Canadian resident’s tax contributions must be public.
Accessibility
Canadian real estate ownership and tax contributions must be freely accessible.
Accountability
Real estate assets must become a publicly transparent asset to eliminate opacity and the creation of safe havens for domestic and foreign capital.
Real estate assets must become publicly linked to individuals to discourage commoditization and speculation.
Real estate ownership must be linked to societal contribution to promote social cohesion, fairness and trust.
Through transparency, voters will be empowered to make decisions on real estate matters by being informed of all key information necessary for formulating policy and hold governments accountable by monitoring in real time the effects of any policy changes.
Regarding beneficial ownership, Canada already has the necessary tools, including the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), that protects our prized financial system.
We seek to implement the beneficial ownership rules in the PCMLTFA to real estate in their simplest form:
Beneficial owners are individuals who directly or indirectly own or control 25% or more of a corporation or an entity other than a corporation; if no one owns more than 25%, then disclosure of the most senior officers and controlling entities will be required.
Records establishing beneficial ownership will be publicly available. We note that Canada and many provinces have already started the process of implementing beneficial ownership rules for corporate holdings. Each province will be able to harness those existing proposals to integrate it into their land registry systems.
We do know that the government of Canada has been able to correlate information from its CRA database and from its access to land registries in order to determine investor ownership and trends in the real estate market through the Canadian Housing Statistics Program (CHSP). [7]
Our model empowers every individual to do the same. And from knowledge flows accountability.
THE COSTS
We believe our model is extremely cost effective.
Firstly, in terms of free access to the land registries, we estimate that the cost to the provinces will be on average no more than $50 million per annum. Revenue from land registry searches is not readily available for each province. We extrapolate from the following: according to the 2021-2022 Service Alberta Annual Report, total land titles service revenue was $90.9 million. [8]
According to the Land Title and Survey Authority of British Columbia, total revenue for 2023 was $53.7 million. [9] Therefore, these figures introduce an upper ceiling for cost. Simple searches are the cheapest service provided by these agencies. The other fees for registering instruments, titles, etc. will not be affected.
Beneficial ownership registration introduces costs and capital expenditures for API changes to the electronic systems. We do not suggest that the land registry services create AML verification officers, etc. We suggest that the existing persons licensed with land registry services register the beneficial ownership information.
Secondly, regarding free and open access to tax information, the CRA already maintains a database of such information.
At present, each tax-payer can view their own tax information online in a safe and secure environment.
The cost to publish the selected individual tax contributions will be minimal.
Our model borrows heavily from the Scandinavian tax tradition of public disclosure of individual tax contributions.
There are, indeed, privacy concerns.
However, public disclosure of tax payer information has long been a tool for improving tax compliance, particularly for corporations. Targeted disclosure for tax delinquents has been an accepted enforcement tool. There are multiple organizations dedicated to tax transparency, fairness, and enforcement.
Disclosure of individual tax information has been the norm, rather than the exception, in the Nordic countries. The same Nordic countries many Canadian politicians like to wax-poetic about.
Our Canadian Model, with its pillars of tax transparency and transparency of beneficial ownership of land, is a model completely compatible with Indigenous knowledge and stewardship of the land, and is entirely consistent with the Truth and Reconciliation Commission of Canada: Calls to Action report.
The experience from the Scandinavian countries shows persuasively that being able to see your neighbour’s tax contributions, and who controls the corporation that owns the mansion on the hill, does not lead to a privacy nightmare or a distrustful society.
Appropriate tools and exceptions can be build-in in the disclosure mandate to protect vulnerable individuals and protect state's secrets.
We posit that in an ever-growing multicultural society, not knowing your neighbor and their contributions could arguably lead to a distrustful society and an unravelling of the Canadian multicultural fabric.
The time to enact the Canadian Housing Model is now.
THE RECOMMENDATIONS
Provincial legislatures must grant free access to land registries and mandate public disclosure of all individual beneficial owners of each parcel of land.
Parliament must amend the Income Tax Act to mandate free public disclosure of gross taxes paid by each taxpayer and require taxpayers to publicly disclose beneficial ownership in real estate in Canada.
[1] https://www150.statcan.gc.ca/n1/daily-quotidien/230920/dq230920a-eng.htm
[3] https://en.wikipedia.org/wiki/An_Essay_on_the_Principle_of_Population
[4] https://www150.statcan.gc.ca/n1/pub/91f0015m/91f0015m2024002-eng.htm
[5] https://betterdwelling.com/canadians-flee-the-country-in-the-fourth-highest-volume-in-73-years/
[6] https://budget.canada.ca/2024/report-rapport/chap1-en.html#a1
[7] https://www150.statcan.gc.ca/n1/pub/46-28-0001/2023001/article/00001-eng.htm#Overview
[9] https://ltsa.ca/wp-content/uploads/2023/06/LTSA-Financial-Report-2022-2023.pdf