Want to make housing affordable? Real estate needs to become a mediocre investment

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What we should be aiming for is policy that would maintain home prices at some reasonable multiple of household income

On the one hand, Mr. Trudeau insisted his government was going to make housing more affordable for younger Canadians. On the other hand, he also declared thatGot all that? Apparently, home prices will fall for the young, but stay stratospheric for everyone else.bob and weave around the topic began to understand why Canadian housing policy is a maze of contradictions.

Why does this matter? Because the first step in devising good housing policy is deciding where we want to go. At the moment, most of us are still in the early stages of grappling with the realities of what it would take to bring Canada’s housing crisis under control. If home prices were to fall 25 per cent tomorrow, then immediately resume climbing at their average pace of the past couple of decades, we would be right back where we are now within five years, with home prices once again hitting unaffordable levels.

I realize this is not a platform any politician wants to run on, but it’s hard to argue with the numbers. So long as home prices climb faster than people’s wages, affordability tends to deteriorate. What might be an equally big challenge, though, is changing psychology. Canadians have grown used over the past quarter-century to thinking of their houses as gushers of wealth. Maybe it’s time to ease back on the dreams of painlessIt would help if our political leaders acknowledged the tension between affordability and real estate profits. It would help even more if policy makers made the case for why the country could benefit from a prolonged period of flat home prices.

 

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