Canadian real estate prices have surged in almost every market, with a typical home price doubling in many regions. A median household in major cities like Toronto and Vancouver would need to save over 20 years for just the down payment, more than 3x the historic average. Seems absurd? The outlandish scenario was apparently a part of everyone’s retirement plan, according to Canada’s government.
That’s according to statements made by Canadian Prime Minister Justin Trudeau in an interview with the Globe & Mail’s City Space podcast. “Housing needs to retain its value… It’s a huge part of people’s potential for retirement and future nest egg,” he explained when discussing affordability.
The statement is shocking. If the intention was to never lower home prices, what was with the tens of billions spent on improving affordability about? We’ve long argued many of the measures implemented were actually to reinforce prices, not lower them. But let’s look past all of that, and get to the most disturbing part of that sentence.
Home prices are based on the liquidity of buyers, provided by the next generation. By arguing elevated home prices are required for retirement, they’re effectively arguing that future generations should be billed for the retirement of older households.
It would make sense if younger generations weren’t already picking up the tab in much more equitable ways. There’s the national pension, the CPP—where the contribution rate has climbed 3x since the 1970s to make up for the fact it underperformed index funds over the past 18 years. There’s also the spending related to Old Age Security (OAS), and the Guaranteed Income Supplement (GIS).
In addition, virtually all provinces participate in property tax relief for seniors. BC, for example, allows homeowners 55 or older to defer property taxes at a rate below inflation. The program isn’t means-tested either, so the entrepreneurial senior that owns BC’s most expensive property can defer the more than $200k in annual property taxes owned if they choose, with taxpayers picking up the balance of that deferred cost. The generosity of young adults knows no bounds.
By pretending the burden of home value liquidity is the sole means, they aren’t just ignoring these contributions. They’re compounding the retirement problem for those who don’t own a home into their old age. Policymakers also know the wealth disparity between renters and homeowners exists.
“The difference between someone who’s rented all their lives versus someone who is a homeowner in terms of the money they have for retirement is massive, and that’s not necessarily always fair,” explained the PM on the podcast.
However, the problem appears to be framed as something only young adults face. It appears they’re wilfully ignorant of the fact seniors don’t always own a home. National pensions were supposed to create a buffer so we could shed the Victorian Era concept of only land-holding people deserving prosperity.
While it’s just a few statements, it should be a wakeup to the way policymakers at all levels in Canada view the problem. When it comes to older households, the argument is that elevated home prices are essential for a proper retirement. When it comes to young adults, they’re told they need to get used to the prospect of never owning a home.
If you’re a young adult pondering what that combination of logic means, be careful asking it in public. Apparently Canada’s national police service considers young adults finding out they’ll never own a home is one of the biggest threats to the country.
