It is a Matter of Policy Decision

Steve Saretsky -

Here’s a wild stat to start your week off, Canada added 410,000 new immigrants in 2021. In the United States, a country nearly ten times the size, added just 500,000 new immigrants. Canada is built on immigration, and it is certainly needed. However, perhaps it’s worthwhile to discuss the tradeoffs, which seemingly no media outlet wants to discuss out of fear of being cancelled.

Our nation is in the midst of a housing crisis. The government has so far failed to adequately house its existing population. Current inventory for sale sits at its lowest levels on record, as a result national home prices have inflated at their quickest pace on record, up over 25% during the past year. So, while government has successfully been able to hit their arbitrary immigration targets, they have not succeeded in their housing targets. To be honest, i’m not even sure if they have a housing target or strategy in place.

The reality is getting new housing built is a complicated, bureaucratic mess. Getting new housing built requires all three levels of government, federal, provincial, and municipal to work together in unison. Government is simply too big, too slow, and too inefficient to make this happen. For example, in Vancouver it takes nearly a year to get a permit to build a new house, and about 3 years to get a condo project rezoned and approved for development. Way too long.

Furthermore, even if we could build more, much more, there are labour constraints. We’ve all heard our neighbours horror stories about home renovations taking twice as long because they couldn’t find a plumber or because their drywaller was too busy elsewhere. It’s because there are currently 231,000 new homes under construction across Canada, a record high. We are building, desperately trying to meet demand, and i’m afraid we are likely near capacity in terms of labour output in the housing sector.

So now what?

Perhaps it’s worthwhile to consider a temporary reduction in immigration targets. Of course this means a reduction in Nominal GDP growth and tax revenues (gasp).

Ironically even the CEO of of Capreit, one of Canada’s largest residential REITs seems to agree. In an interview with BNN Bloomberg, CEO Mark Kenney suggested Canada is simply not able to build enough housing supply fast enough to meet current immigration levels. Oh, and by the way, Capreit stands to benefit from higher immigration. More newcomers chasing a fixed supply of housing = higher rents for Capreit.

Government has the ability to fix the housing crisis and it is a matter of policy decision.

Three Things I’m Watching:

1. Currency debasement shows up in hard assets, not in CPI inflation baskets. (Source: Richard Dias)

2. Canada has a record number of new homes under construction. (Source: Stats Canada, Steve Saretsky)

3. Canadian employment is now 240,500 above where it was in February 2020. (Source: BNN Bloomberg)

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The Saretsky Report. December 2022