The Liberal Government's Solution to the National Housing Crisis

Canada's Mortgage and Housing Corporation or CMHC, the federal government's crown corporation which is responsible for Canada's housing through its administration of the National Housing Act, has recently released its solution to Canada's ongoing housing affordability crisis.  CMHC claims that it contributes to the well-being of Canada's housing situation, ensuring that more Canadians have access to affordable housing.  As such, it recently released its Housing Design Catalogue, a collection of standardized designs that will "make homebuilding easier" for Canadians.

Let's start by looking at Canada's housing affordability according to the National Bank:

 As you can see, in Canada's major cities, the monthly mortgage payments on a median-priced dwelling (includes non-condos and condos) as a percentage of household income has reached and remains at painful levels in Toronto (78.4 percent) and Vancouver (92.3 percent).  In Canada as a whole, mortgage payments are 56.6 percent of household income, up from an average of 40.7 percent since 2000. 

According to Statista, Canada's house price-to-income ratio was the second highest in the world in 2023 as shown here:

So, let's look at the Canadian government's solution to the housing problem:

Because one of the key aspects of Canada's housing plan is to densify neighbourhoods as quoted here from the website:

"Adding more homes to our neighbourhoods is a key part of addressing Canada's housing crisis.  The catalogue makes this easier by providing plans that are focused on infill development and gentle density.".

Gentle density - it's a nice way of describing a 15 minute city, isn't it?

Since the Canadian/Liberal government is so wonderful, they have provided housing designs for each part of Canada.  Let's look at one of the suggested housing designs for the least unaffordable regional market, British Columbia, noting that the publication says absolutely nothing about the cost of constructing or purchasing one of their recommended designs:

 

Let's look at the smallest design, the Accessory Dwelling Unit 01 which comes it a massive 540 square feet:

Here is a more detailed floor plan showing that occupants will essentially living in a three tiny room home:

 

Now, let's look at the recommended housing designs for Canada's second least affordable housing markets, Ontario:

Let's look at the smallest design, the Accessory Dwelling Unit 01 which comes it an ample 634 square feet:

Here is a more detailed floor plan showing that occupants will essentially living in a rather cramped three room home:

So, if you like the thought of living in someone's backyard in a dwelling that is roughly the size of two shipping containers, these are the housing plans for you.  You can guarantee one thing though - you won't find Canada's political class living in one of these tiny homes. 

Canada's housing market is a disaster zone thanks to the Liberal government's open border policy and, under the World Economic Forum insider and now Canadian Prime Minister Mark Carney, I would suspect that things will not improve. Young Canadians have no hope of owning a home but, then again, perhaps it's part of the "you'll own nothing and be happy" mantra of the ruling class.

America's Housing Affordability Issue

A recent speech by James Bullard, President and CEO of the Federal Reserve Bank of St. Louis provides us with an interesting viewpoint regarding the current state of the U.S. housing market.  In his speech given at the Bi-State Development 2017 Annual Meeting, Mr. Bullard looks at living standards across American metropolitan statistical areas (MSAs) which are defined as an area containing a large population centre and the counties adjacent to that centre, particularly those areas that have a high degree of integration with that population centre as measured by commuting patterns.  In his speech, he focuses on housing and housing affordability, a key part of living standards and a measure that may give us some sense of where the housing market is headed.    

Here is a map which shows the MSAs in the United States:

In 2015, about 86 percent of Americans lived within one of 381 U.S. MSAs and about 56 percent of Americans lived within one of 53 large MSAs which have a population of more than 1 million people.

Mr. Bullard notes that the cost of living across the 381 MSAs varies widely, driven primarily by the cost of housing.  One way to measure the cost of housing is to look at the median price per square foot as shown on this map: 

Zillow data shows that in 2015, the median home value in San Francisco was $479 per square foot compared to only $105 per square foot in St. Louis.

While raw per square foot data is interesting, an even more important measure is affordability.  Here is a map showing the share of households that can afford payments on a median-priced single-family home in their MSA:

As you can clearly see, the sun and sand states that saw their real estate markets decimated in the housing market collapse of the Great Recession are, once again, seeing their housing markets become unaffordable by a majority of their households.  This is particularly the case in coastal California where some MSAs are finding that less than one-third of their households able to afford a median-priced single-family dwelling.  There is an additional problem with the growing lack of affordable housing; households that spend a higher portion of their take-home income on housing are less able to spend on other items and since consumer spending forms a significant portion of GDP as shown here:

...we are increasingly likely to see even slower economic growth rates.

While the S&P/Case-Shiller Composite Home Price Index is showing this seemingly healthy trend:

...it's becoming increasingly apparent that, at least in some large markets, the rise in house prices in unsustainable given that housing is not affordable by a median family in that market.  This affordability problem will become even worse as interest rates begin their slow grind upwards.