The Agenda with Steve Paikin (Audio) - Can a New Government Solve an Old Housing Problem?

Episode Date: May 7, 2025

Canada's middle class is being squeezed out of housing markets in Ontario's largest cities, harming not only those people but local economies, too. But the federal Liberals say they have a plan to build hundreds of thousands of affordable units, even creating a new crown corporation for the task. But a lot needs to happen before those homes can be built at the scale and speed needed to get the middle class into homes they can afford. To discuss we welcome Mike Moffatt, Director of the University of Ottawa's Missing Middle Initiative and Leslie Woo, CEO of CivicAction.See omnystudio.com/listener for privacy information.

Hello everybody in the Hammer and Beyond. We are coming your way. May 10th at the Music Hall in downtown Hamilton. We're recording a new episode of TVO Today Live and we'd love to see you there. We're talking to the amazing and multi-award winning Canadian musicians, Sarah Harmer, Cadence Weppen, and Tom Wilson,

about the power of music and musicians in our culture, and especially during tumultuous political times. Tickets are free, thanks to the Wilson Foundation. musicians in our culture and especially during tumultuous political times. Tickets are free thanks to the Wilson Foundation. Go to tvo.org slash tvotodaylive or search it directly on Eventbrite. So join us May 10th, 7 p.m. in Hamilton. Canada's middle class is being squeezed out of housing markets in Ontario's largest cities, affecting not only those people but local economies too.

The federal Liberals say they have a plan to build hundreds of thousands of affordable units and are even creating a new Crown Corporation for the task. But a lot needs to happen before Ontario's middle class can move into homes they can afford. To help us understand what's at stake, let's welcome in the nation's capital, Mike Moffitt, executive in residence at the Smart Prosperity Institute. He's founding director of the University of Ottawa's Missing Middle Initiative.

And here in our studio, Leslie Wu. She's the CEO of Civic Action. And Leslie, we're delighted to have you back here in our studio. Mike, good to see you from the nation's capital as well. Let's get to this. Leslie, I want to know what hurdles to a strong economy are created when middle class people like teachers and nurses or construction workers are squeezed out of the housing market.

Well, Steve, thanks for the invitation. And let's just humanize the issue. Anyone who has challenges affording a home means they're putting money and taking money away from their ability to improve their quality of life, their ability to afford their kids the right type of education, access to health care, all these things compromise our ability to have a good quality of life.

And so if we aren't able to address the foundational importance of housing, we are definitely doing a short shrift because those who we're talking about, middle income households and families, they have jobs. And 10 years ago, or maybe even less, they were able to afford, whether it's rental or ownership. And now they are rapidly, rapidly being less capable, and these are folks that power our economy, that enable us to have the quality of life that we all aspire to.

Let me follow up with Mike on that, because I hear anecdotal evidence about this all the time, Mike, but you tell me how profound slash widespread this phenomenon is. People who would like to work in the GTHA but can't because they can't afford a home here or don't even bother coming here in the first place because they can't afford a home here.

How big a problem is that? Well, it's a massive problem. I'd actually say it's existential for the GTA, that we are seeing a whole generation, these kind of middle-income workers, so, you know, your nurses, healthcare support workers, administrative assistants, and so on, who just can't make a go of it in the GTA. So, often they're leaving entirely, or they're moving to a community like a Brantford, Tilsonburg, or so on, they initially start commuting back to Toronto.

And then they realize, hey, wait, Tilsonburg and Brantford need nurses and electricians as well. So it does create the conditions where you have these kind of chronic labor shortages in these middle income type jobs, and that harms everyone. It harms the quality of life, but it also prevents companies from expanding because there are certain positions they just simply can't fill. You're in the second biggest city in Ontario. Is it a problem where you are as well? Yeah, not as much, but it is absolutely a problem.

And, you know, we are seeing folks move out to smaller communities like Carleton Place and Perth and so on. And it is leading to longer commutes. So it is also a quality of life issue for those workers. And even if they're still able to keep their jobs in Ottawa, instead of having a 15 or 20 minute commute, that's 40 or 50 minutes. Which I know doesn't sound like a lot to the folks in Toronto, but in Ottawa it's a relatively

new phenomenon. I gotcha. Leslie, what does it mean for the tax base and potential municipal spending when this group of people, which is the biggest chunk of people in our society, can afford to live in the city? Well, it's all interrelated in terms of, let's start with the most basic thing which is, first of all, the City of Toronto, most cities in the GTHA rely on property tax base which is home ownership. Home ownership has now become less and less accessible to most people.

50% when we're talking about the middle income households in the GTHA that's 50% of the population. 50% of the population, 50% of the households. So that's a significant portion that is at risk in terms of a municipal economy. It also means talent, attraction, and retention in terms of the ability of the sort of domino effect of your being able to live there, the use of restaurants, your ability to spend. And so municipalities rely heavily on these

middle-income households to power not only the quality of life but the economy itself. So this is a big challenge. Mike, I'm sure you remember during the election campaign just completed that Mark Carney, when he was running for office, said he wanted to undertake a building boom of housing, the likes of which we haven't seen since the end of World War II. Do you like the use of that analogy to describe the challenge we're up against today? Well, I certainly think it is that magnitude of challenge. I think we haven't seen housing shortages that are this large

since the 1940s. So obviously that affects individuals, but it also affects cities for the reason that you describe. So you know, you talk about municipal finance. I mentioned in Ottawa, all of those families moving out to Perth and Carlton Place and so on. Well, now they're paying their property taxes to Carlton Place and Perth, but they're driving into Ottawa every day and using Ottawa's infrastructure. What that does is it hollows out the tax base of these large cities. And we've seen in the United States that that has been a huge problem when everybody moves out to suburbs and pay their taxes to a different government. So hopefully with Mark Carney's

plan, we can actually get more homes in cities so that way the people who are using Ottawa's infrastructure can actually live inside the city of Ottawa so you know their revenues and expenses are all going to the same place. And again Mike a follow-up to you because you are in Ottawa we have heard the Prime Minister say he wants to create this new crown corporation that would be responsible for essentially unleashing an amount of home construction, the likes of which we haven't seen in 80 years. Can you give our viewers and listeners some idea of how complicated it is to create such an agency, how much it would cost, how many people would need to work there, what their

mission might be, all that kind of stuff. Yeah, so overall, we didn't get a lot of details in the platform, but they were talking about a number of initiatives, like a $25 billion fund to accelerate some of this housing. Now a lot of that, that can be a little bit misleading because a lot of that is loans rather than grants. But overall, it's a lot of money. And it's going to be very difficult to do, because you're basically, it's like founding a startup.

So you're having to find people wherever you can get them from existing departments, come up with a new model of building homes. And the federal government here is going to be acting as developers. So not only are they having to figure out all the sort of internal bureaucracy, but you know, the private sector is going to be the one who actually builds the homes. So this, at the end of the day, is a procurement issue.

And we know that the federal government and most governments in Canada are not great at procurement, you know, and there's not really that much fundamentally different from procuring a fighter jet, which we haven't been able to do in decades, and procuring apartments. So this is going to be an incredible challenge in navigating bureaucracy. Now, obviously, with Prime Minister Carney, we have someone who's done that for most of his career, but I don't think we should underestimate the challenge. Sounds like Mike is somewhat lukewarm on this effort. Leslie, what do you think the prospects are?

So I'm probably closer to that category. I think let's just talk about scale. You know, right here in the GTHA, it's 1.2 million housing units we have to build. It's the equivalent, I think, in the GTHA of $600 billion that we have to spend over five years. That's a hard... Like, think about this in comparison comparison the rapid transit expansion that Metrolinx has undertaken is a six billion a year 60 billion effort and so it when the Canada bills home is I think the financing equivalent of 36 billion it's a drop in the bucket so they cannot do it alone so over and above the challenges And I've been involved in the setup of large organizations in terms of getting projects and infrastructure done,

not only are they the challenges that Mike is talking about, the money is probably not enough, and it's gonna take provincial collaboration, municipal collaboration, because even if you had all that money, the capacity to deliver requires not just the capability of construction companies, it requires the

ability for municipalities to clear the path, for the province to do its part and all that is not easily done. The only example I can think of off the bat is Waterfront Toronto, a tripartite arrangement. And that was like 2000 acres of land over, you know, it was started in 2021 when three, a prime minister, a premier and a mayor stood together, right, and had the community together. And even within that, it's been 20 years in the making. So this is not easy, easy chops. These are not easy chops. That's the quote of the day. These are not easy chops, right.

That's the quote of the day. These are not easy chops. OK, Mike, you quite rightly point out that the government actually doesn't build homes. They have to incentivize the private sector to build the homes, private development companies. How would you say the, what's the best thing government could do today or going forward in order to incentivize builders to build because as everybody I think around this literal and metaphorical table knows there's no building going on right now there's no new home construction going

on right now it's pretty terrible out there so what do you say? I think part of it is those economic conditions and we do have to just wait and ride that out a little bit but a a lot of it has to come with sort of right-sizing our regulations. You know, we've seen, you know, we talk a good game when it comes to density, but, you know, we're not kind of allowing the sort of family-friendly density we need. We need changes to building codes. A lot of the great, you know, small apartments that we love when we go over to Europe aren't legal here. We need to change that.

I think one of the biggest things that we need to change is development charges and taxes, which can take up about a third of the cost of constructing a home in the GTA. That's far too high. They've gone up a thousand to two thousand percent over the last 20 years. We need to right-size those because it just, the math doesn't work on a lot of these projects. You know, after you pay development charges, community benefit charges, land transfer tax, and so on, you just can't produce a home at a price point that either owners or renters could afford. But municipalities, Mike, will say we need those development charges, we need that revenue in order to pay for the services that the future homeowner will need. So if they can't get that money from development charges,

where are they supposed to get it from? I think we need to take a holistic approach at all of the things that development charges pay for. So one of the big ones is water and wastewater infrastructure. There are other models to finance those, one of which was in Ford's own Task Force blueprint report about creating municipal service corporations to build these things and incorporate the extra, you know, the building cost of water and wastewater into monthly bills, which can really

lower financing costs. One of the big things we need to look at is how we construct roads, which is the number one biggest line item that development charges pay for in most municipalities. It's never really made sense to me why homes have to pay for roads. Like, shouldn't cars be paying for roads? Or drivers anyway? So, I think, there's drivers. Well, exactly. So, I think, you know, I don't think the answer is just to kind of mechanically lower these, but I think we need to have a larger discussion around how do we pay for this infrastructure. But we should note that there are 10 provinces and 50 states in North America, right? There are 60 jurisdictions. And our development charges are higher, you know, twice as high as the next highest.

So, you know, 59 other jurisdictions have been able to figure this out in North America. So certainly, like Ontario, should be able to get some best practices, look at what they're doing in Alberta and PEI and Michigan and Texas, and go, okay, what are the things that we can incorporate into an Ontario context? Leslie, in your view, the building codes, these other kind of jurisdictional regulation issues, how big are they a factor in this problem? So they're significant. And I think part of the challenge is there's, let's use the Greater Toronto Hamilton area, there's over 30 municipalities.

Each one has a different view. It's unequal. It creates unpredictability within the system, which costs money. So I think there is a role for the provincial government in order to sort of think about the housing challenge as a regional issue to bring all the municipalities together.

I also think that the federal government needs to understand that while all the the levers that it needs to enable itself And its money to hit ground it can't happen without the municipalities in the provinces Right-side by each and in fact those are all the barriers that any developer Private or not-for-profit encounters. It's and it just it's like high friction in the system that we need to get rid of. Mike, I keep hearing that quote-unquote modular homes are part of the solution here. I suspect that's a term that a lot of people still do not know what that means. So could you start by telling us what's a modular home and what does the sort of modular home supply chain

and potential look like right now? Yeah, so we have a number of these producers. There's one in Ottawa. There's a big one in St. Thomas, close to my hometown. And these homes can look a lot like traditional homes. But what happens is instead of the assembly happening on site, all or part of the assembly happens in a factory and then is trucked down. There's certain advantages to this. You can have, you know, robots are doing a lot of the jobs, they can work 24-7 days a week instead of building on

site. But these are not, you know, people think that these are necessarily just trailer homes, which they could be, but a lot of times they are, you know, two with three story homes with a foundation. They're just built in a different way. But some of the challenges, just goes to what we speak earlier, that different municipalities have different regulations for a variety of things.

And it makes achieving economies of scale here difficult. It would be like in the automotive industry if you know Mississauga had a rule that the gas tank door had to be on the passenger side and Brampton said it had to be on the driver's side and Kaladin said it had to be behind the bumper you know we would never be able to assembly line cars we'd be making them one at a time but that that's essentially the challenge with housing and these modular approaches, is that regulations are so different, even between municipalities, it's really hard for these companies to achieve scale.

Are these homes cheaper than a built on location home? Currently no, but the hope is that if these companies can achieve scale, they will become cheaper. Just like we've seen with solar power and wind power and so on, that there's learning by doing, there's R&D that goes on, and you can bend the cost curve as you produce more of these. We haven't hit that inflection point, at least in North America, when it comes to factory-built approaches, that they tend to still be as expensive, or in some cases more expensive than traditional

methods. But if we start producing enough of them, we certainly believe that we can achieve cost savings that are 20, 30, or 40 percent more. Leslie, if you want to achieve a goal, it's usually a good idea to set a target. And Mark Kearney has set a target. He wants to build a half a million homes a year in this country. That's a big number. Is it doable?

I hope it is, but I think there's so many conditions that have to be put in place. We just talked about offsite fabrication as one, the bylaws, the building code, the financing, the capital stack that requires not only public money but private equity and philanthropic efforts. There's a lot that has to be lined up. But just to put it all into perspective, here in the GTHA, if I use the number that CMHC has produced around the number of houses we need in the next, by 2030. It's somewhere in the order of 240,000. In 2022, here in the GTHA, do you know how many we produced, Steve?

47,000. So we have to get, before we even get to Mark Carney's 500,000 across Canada, this region, which is one of the most populous, those numbers and our capacity to do it on the ground, whether it's private, public or not for profit, is a big challenge. So it's critical that we pay attention to this, but it's critical that we actually work together, we the Royal We work together on this because no one government, no one private developer, no one not for profit can do it.

Mike, your view on the half a million number? Yeah, I don't see us getting there any time soon, unfortunately. We've never done more than 300,000 in any one year. So to go from 250,000, which is roughly the level we're at, and double that, I don't think is going to happen any time soon. The upside is, I actually don't think it's necessary that the some of the CMHC numbers come, they

were produced before we made changes to immigration targets and international student numbers. So I don't think we're gonna hit 500,000 but I don't think we necessarily need to to put a dent in the housing crisis. But, you know, even 350,000, which I think we would need, is going to be a significant challenge. So I do worry that the Prime Minister has set himself up to fail a little bit where we could make some massive transformative changes, get to 340,000, 360,000, which would be a massive win.

But Canadians might look at that, go, well, you promised half a million. Clearly, this program's a failure. OK, in our last couple of minutes here, I should say in the interest of full disclosure, my brother's a home builder in the southern Ontario area. And I don't normally, I mean, the Leafs are in the playoffs. When we get together, we talk about the Leafs. We don't normally talk about his business.

Shocking. But as it ends, it's not shocking. As it happens, we actually for a few minutes talked about housing policy the other day because I knew I was about to do this discussion and was interested. And he did say to me, you know, there's just nothing happening right now. Things are just tight as a drum. There is nothing going on. Leslie, how is it possible that we know that people want homes? We know that interest rates are not sky high. We know there is availability of labor. Why are homes not being built?

Why are people not buying homes these days? I call it random acts of kindness, Steve. We have lots of activity, people meaning well, but it's all fragmented and disconnected. And so that is one of the, we don't talk about that. We talk about, you know, we've got 50 units here, we're going to do this little piece there, but we need to recognize that it is, it is the scale of what we need to do requires a whole complete system approach. And so I think when I think about what it is that's going to get us where we need to

get to, it's a lot of the work that we're doing in enabling different points of view to sit around a table, enough with the finger pointing about who's doing it right or not doing it right. Let's just really understand that this is a national crisis. It's a provincial crisis. It's a city crisis. And it's more than just about housing. OK, Mike, in the last minute, this obviously, all of what I've heard from the two of you today,

will require some talent, some ingenuity, some political will, some preparedness to sort of put aside petty regional differences and really start singing out of the same hymn book. Mike, are we capable of that? This is going to be a wartime-like challenge. I think the Prime Minister used the right term here, that we are trying to operate in the center of the Venn diagram, where we're looking at all three orders of government having to work well together, which is something we don't do well. We're having governments have to procure more in terms of social housing, and that's not something we do particularly well.

And finally, we also want to make sure that these homes are compatible with our climate ambitions, both in the adaptation side, but also making sure that we hit our emissions target. And we haven't really been great at climate policy either. So when we take housing and climate and procurement and governments working together, three or four things we don't do particularly well and say, okay, we're gonna operate

at the center of this Venn diagram, this is gonna be a massive, massive challenge. Gosh, you two, I was really hoping after 22 minutes on this, I would feel better about our prospects going forward, but I sure don't. Well, maybe this is a wake-up call, along with many other bells that are getting rung these days on this issue, and maybe they will listen.

Mike Moffat, Smart Prosperity Institute, Leslie Wu, Civic Action, it's really good of both of you to join us on TVO tonight. Many thanks. Thanks. Thanks for having us.