With the federal budget set to come out later this month, what issues are on the minds of Canadians?
According to a recent survey by KPMG Canada, housing is a major concern and not just for the average Canadian, but for businesses too. Prior to the pandemic, close to 60% of Canadians could afford to own a condo. That number plummeted to 45% in 2023. An even smaller portion–26%–can now afford a single-family home (Source: RBC).
The ripple effect of the lack of supply and high cost of housing is being felt throughout the economy. KPMG’s survey found that 94% of Canadian business leaders believe that housing is the biggest risk to the economy and should be the top priority in the upcoming federal budget.
87% of business owners say that housing costs are forcing them to pay more for labour and are negatively affecting their ability to attract and retain talent. If employees cannot afford to live in an area, it becomes a challenge to get them to work there. When housing is scarce, workers become scarce as well.
More Than Money Radio recently had Michael Capus, partner with KPMG Canada, on the show to discuss this survey and possible solutions to the housing crisis.
According to Capus, this complicated issue will not have a straightforward solution. The survey found that eight in ten business owners believe that the government should use innovative tax measures to make housing more affordable, including making mortgage interest tax deductible.
While this may help the affordability issue, Capus points out that it will not solve the challenges related to supply. It is estimated Canada will need between 5.8 and 10 million new homes in the next ten years. Last year, only 250,000 were built.
So who should be responsible for solving the housing crisis? Is it primarily a government issue, or should business owners be on the hook to make housing more affordable for employees?
Capus advocates for a new model that brings all levels of government, business owners, not-for-profit organizations, and the development community together. He likens it to the childcare sector where more businesses are working with non-profit organizations to provide childcare because they realize it has a long-term upside for them when it comes to retaining employees.
Together, businesses and the government need to look at communities that are attracting commercial businesses. How are employees getting there? Are they commuting or are they living nearby? They also need to look at virtual vs in person employment options, as these factors can have a major impact on where people choose to live and work. Additionally, they should evaluate what type of housing is needed. According to Capus, trends are pointing towards a need for multi-generational housing; however, most of the housing being built today is for individuals or single families.
Ultimately, businesses will have a part to play in finding the right mix of supply and demand.
Capus believes it all comes down to partnership. Everyone needs to work together to make housing more affordable. That means spending money on both market and non-market houses, not on home buyers.
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David Popowich and Faisal Karmali are Investment Advisors with CIBC Wood Gundy in Calgary. The views of David Popowich and Faisal Karmali do not necessarily reflect those of CIBC World Markets Inc.
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