If It Ain’t Broke

Where I grew up, it was common to hear someone remark ” If it ain’t broke – don’t fix it”. Great point, but I often wondered all of these years – what if it is broke? No one ever seemed to have an answer for that.

No matter what your profession, your beliefs, you political leanings, I think we all can agree that housing in Canada is broke!! For whatever reason, it just doesn’t seem to do what it is supposed to – provide shelter for hard working people. Yes, people own homes, but the average person cannot afford housing.

It didn’t used to be this way. A generation ago housing was something that just, well….existed. Yes, people had some high rates to fight through in the late 1970’s and early 1980’s. Yes, it wasn’t always easy, but we seemed to have enough of it, and it seemed to work. So, what happened?

Over the last 40 years, housing has become an increasingly political tool. How many bureaucrats are involved in today’s housing market? Probably more than the trades that build the damn house!!!. Between Federal, Provincial and Municipal, there are millions of people in Canada involved in housing. Anyone who has read anything I have ever written, or had a conversation with me generally knows I don’t think the government is usually the answer – but rather part of the problem. Housing has been used by governments lately as a political weapon. Want to keep the people happy? Okay, then house them, have the value go up, and let them think they are wealthy. Happy people vote in the incumbent. Unhappy people demand heads on platters.

The problem is that there is so much government involvement in today’s housing market that they are the ones who set the temperature. In Toronto right now, 26% of a homes cost is government fees, taxes and levies!!! Yes, a little more than a quarter. So, if the government wanted to – and trust me, they won’t, but if they wanted to, they could eliminate taxation on houses, and drop the sale price by a quarter!! Overnight!! Likewise, if the government wanted or needed more money, they could easily DOUBLE taxes involved in housing and only raise prices by 26%. Now, for everyone that owned a home, this would be a great thing, as the value of their existing home would rise by about 26% – almost overnight. It would really suck for anyone trying to buy, but so long as the people who already own a home out vote the people who want to buy a home – sound government policy.

How many different government agencies are involved in housing? Make a list of all the different agencies involved and you will be surprised. From regulators, to financial departments, to entire government departments that deal with housing, it adds up. The problem is that all these government departments keep requiring more and more money, and higher and higher taxes.

In Today’s Budget 2024 – to be released in about an hour, we will see a flailing incumbent government pull out all the stops to try to buy votes – and housing will take centre stage. They know Canadians are pissed, and so they will throw you a bone. They will make you think they are fixing a problem. Now, let’s forget for a moment that a lot of the problems have been caused by the same exact people who are now going to declare victory in fixing it. Putting that aside, I ask – when was the last time a government “fix” ended up working? When was the last time a government “fix” didn’t have unintended consequences that were worse than the initial problem? How much will any “fix” cost the taxpayer? If the “fix” for housing was as simple as a policy – it would have been done by now.

We know the promised ” fixes ” will mainly be lip service and ideas, and none of it will come to fruition. We know it will cost our grandchildren higher taxes for the policies that will “fix” housing. Ironically enough, with some of the new builds these days, the damn houses that do get built probably won’t last as long as the debt the government will rack up to pay for it all.

Yes, housing needs to be fixed. Yes, we need to make rapid progress in building safe, affordable homes for Canadians to live in. However, I fear that any of the fixes rolled out in Budget 2024 will be akin to lipstick on a pig, or a good ol patch job to get us to the next election – no meaningful, actual progress will be made. A lot of promises will be made, but will they actually result in finished, safe homes for Canadians? Before celebrating any new changes today, ask yourself who lost? Government policy is usually a zero sum game, so for everyone who today’s budget will help – who will it hurt? For everyone that thinks they have one, there has to be some that lost. As time goes on, we will start to see that any policies enacted will create winners – and losers. If you want to be a successful broker, find out who will be a loser in the game, and structure a business plan to help them get through it. Most mortgage agents will focus on the people the new policies will help – let them all chase the same few people, and instead craft a policy for helping out the people who will lose on the policy.

Housing is beyond broken, and it is beyond time to fix it. While I don’t know what the answer to fix it is, I can assure you that getting government as far out of housing as possible would be a good start. After today’s budget is released, and we see the reaction of the financial markets – then we will see what the future holds. Financial markets are generally smarter than any government, and can price things instantly – in real time. The future of Canada as we know it is on the line today.