Eight Pieces of Housing Advice to the Prime Minister
Some friendly advice
First, an announcement… Urban planner and land economist Alex Beheshti has joined the Missing Middle team! You may know Alex from his numerous media appearances on television, radio, and in print. Alex will be handling a range of responsibilities here, with a strong focus on provincial and municipal reform, particularly in areas such as development charges. Welcome to the team!
Dear Prime Minister,
Congratulations on your historic victory. Now, the hard work of addressing the housing crisis and implementing the Liberal housing platform begins.
Having worked with you on the Blueprint for More and Better Housing, I am aware that you have a deep understanding of the housing file. However, as your former co-author, I cannot resist the opportunity to offer you some friendly advice.
Here are eight key considerations to keep in mind as your team undertakes this vital work.
1. Be the opposite of Trump and create policy stability
The constant chaos and uncertainty surrounding tariff policy are causing investment to plummet in the United States, as it is impossible to plan for the future under such an environment.
While Canada won’t be conducting policy through press conference musings, there is a real risk that policy uncertainty will cause a drag on housing investment in Canada. I believe it already has, with constant changes to development charges, the point systems in programs like MLI Select make it challenging for developers to plan for the future.
Your government will need to make big changes. But it would also have to avoid the temptation to keep tinkering. Instead of making a series of hundreds of small changes, select a small number of housing priorities, focus all your housing attention on those, be transparent, and leave everything else alone.
2. Determine the future failure points before you implement
A generation of students has taken my political risk course at Ivey, and one of the tools we use is pre-mortem analysis, as outlined in the Red Team Handbook, the closest thing we have to a course textbook.
In a pre-mortem analysis, you assume an initiative that you have yet to launch has failed, and you work backwards to brainstorm why it has failed.
Apply this to all of your housing initiatives. Start by assuming that the number of homes built from the initiative turns out to be much smaller than forecast. Then work out why that might have happened.
I believe you will find that for most of your planned initiatives, you will find a number of issues that crop up over and over:
The plan involves building a high number of “Missing Middle” type housing, such as fourplexes and small apartments; however, zoning, building codes, taxes, and municipal approvals make it infeasible or uneconomical.
The expected volume of capital does not materialize due to rules such as EIFEL or other barriers.
After a series of revisions and committee work, programs become so overly targeted that only left-handed welders named Hank qualify.
After generating such a list, ensure that the overall plan addresses these as part of the small number of housing priorities discussed above.
3. Your data availability is atrocious. Please fix it.
Government data on housing is truly abysmal and has deteriorated in recent years, as the CMHC no longer collects comprehensive data on housing completions. The federal government aims to expand Canada’s social housing supply; however, it is unclear how many units currently exist. The federal government has set a priority to lower development charges, but it has no idea how high they are in any given municipality, nor does it know how much they have grown over the last 10 or 20 years.
The private sector is filling it where it can, with CREA collecting data on home prices, Rentals.ca providing data on the rental market, and so on. But the private sector can only do so much.
The federal government will be unable to implement evidence-based housing policies without improved data. And simply giving the CMHC or Statistics Canada a few more dollars won’t be enough. The government should appoint a temporary Housing Data Czar, along with a dedicated team and budget, to effectively transform housing data in Canada.
4. MURB is your secret weapon, but you need to get the details right
Reintroducing the MURB program could transform rental housing in Canada, allowing for the construction of a large number of smaller-scale rental apartments. It could allow for more units with three or more bedrooms. It could lead to a significant shift in investor activity, with a shift from buying existing homes or pre-construction condos, and instead channelling that activity into building smaller and mid-rise apartment buildings.
But take-up could also be minimal. In part, this will be determined by ensuring the policy environment allows for the economic building of these units. But it also depends on how MURB interacts with other parts of the tax system, such as partnership at-risk amount rules. The types of investors who utilize MURB are likely to be different from the wealthy doctors who used it in the 1970s, due to rules surrounding professional corporations.
Implementing this effectively will be more challenging than it appears. Consultations are needed.
5. Your programs will fail without substantial building code, zoning and approvals reform
Whether it’s MURB or Build Canada Homes, your government is placing big bets on scaling up Missing Middle-type housing. However, without substantial reforms to building codes, zoning, and approvals, few will be built.
It will be vital to legalize European-style buildings, which will require collaboration between the federal government and provinces to amend provincial building codes. At a minimum, single egress buildings must be legalized up to six storeys, and less-expensive European-style elevators must be permitted. The Blueprint for More and Better Housing, the Mid-Rise Manual, and Eight Ways to Enable Missing Middle Housing all provide useful recommendations.
Similarly, if municipalities refuse as-of-right construction of these buildings, they simply will not get built, as they will get strangled by red tape. Requiring substantial regulatory streamlining as a condition of future iterations of programs like the Housing Accelerator Fund will be vital. One possibility is to create a National Zoning Code (NZC), as recommended in the National Housing Accord, and require that municipalities have codes that are consistent with the NZC.
But with that in mind, don’t forget point 1. Avoid the temptation to make hundreds of zoning and building code changes. Instead, focus on a few very transformative reforms, and leave everything else alone.
6. Development charges need massive reform, not just lowering
As you are aware, the MMI team believes that Ontario, in particular, is experiencing a development charge crisis that is contributing to a broader housing crisis. DCs, and other taxes on housing construction, are too high and growing at an unsustainable pace.
Your party has committed to working with municipalities to lower them substantially. That is a good thing. But simply replacing DC money with federal funds uses dollars to paper over the larger issues. Instead, the federal government should examine best practices nationwide and assist provinces and municipalities in implementing them. Ontario should look to Alberta to understand why Calgary and Edmonton can keep these taxes at reasonable levels, while Toronto and Newmarket cannot.
New funding models should be introduced that are better tied to expenses. Water and wastewater infrastructure can be funded through water consumption, rather than through property taxes. Why do taxes on homes, rather than cars, pay for municipal road construction in Ontario?
The problems with taxes on housing construction, particularly in Ontario, have deeper, structural problems beyond just being too high (which they are).
7. Increase your ambition on the GST cut for new housing
You are probably sick of hearing the MMI team say this, but the GST promise in the platform does not go far enough. As we said a couple of weeks ago:
Because the GST only applies to new housing, it acts as a development tax (or, if you prefer, a development charge), increasing the cost of homebuilding and causing fewer homes to be built. While both the Liberal and Conservative moves are being framed as reducing the price of homes by 5%, the supply-side effects are vitally important.
The Liberals have limited their plan to first-time homebuyers. In our view, this is a mistake. The goal should be to increase the supply of housing, and such a restriction limits the effectiveness of the program. For example, the existence of the GST on housing discourages seniors from downsizing from their larger suburban homes to smaller, newly constructed senior-friendly housing. By eliminating the GST on housing, we can get more of these senior-friendly homes built and free up larger suburban homes for the next generation of families.
It took me several days to notice that in the release of the full platform, the Liberals have already started to make the GST plan more ambitious, by sneaking the following line onto page 38:
In recognition of the high costs of homes in more expensive housing markets, we will also lower the GST on homes between $1 million and $1.5 million for first-time buyers.
This is an improvement, and I’m glad to see you are willing to expand the policy. Expand it further, and apply it to all buyers of primary residences. Yes, it will cost some money, but it will be worth it.
8. Be extremely careful with countervailing tariffs
I have not forgotten the ongoing issues with the United States, and I am sure you have not either. About a month ago, we did some back-of-the-napkin math and found that countervailing tariffs could add $1 billion to the cost of housing construction in Canada. A strong response to American trade-war aggression is needed, but we must be strategic. We must not increase tariffs on key housing inputs that we cannot source from other countries. We may also want to lower tariffs on housing-related inputs from other countries, giving our developers and builders more options.
Best of luck - the country is counting on you!
The MMI team and I have not awarded the Liberal housing platform and messaging a perfect grade; in fact, just last weekend, our Toronto Star piece referred to the plan as unambitious. However, all of us at MMI, regardless of our political preferences, share a desire to see an end to the housing crisis. We wish you the best of luck in these endeavours.