Governments must get involved as lower-income folks struggle in housing market (Guest Column - Windsor Star)

The hot real estate market has taken Windsor by storm.

News reports highlight the dramatic increase in home prices, the plight of first-time home buyers not being able to enter the market and long-time homeowners losing in uncontrolled bidding wars. Yet, Windsor still ranked at no. 1 provincially as most “affordable” in terms of home prices at a $571,000 average (WECAR). Many housing experts, economists and advocates, including the Bank of Canada, have been issuing warnings that the lack of regulation is at a crisis level. What should we make of all of this for a midsized housing market in south western Ontario? These trends indicate that left to its own devices, Windsor is on track to becoming increasingly unaffordable and inequality will intensify across the region. In looking at this drastic shift, alongside the building frenzy across our region, we need to call on all municipal, provincial, and federal policy makers to step in, invest, and regulate this chaos, as building more homes will not be the sole solution to the affordability problem.

The numbers are clear: in 2020, rental prices increased 8.4%, approximately 4 times the regulated rental increase (2.2%), despite a softening of the rental market, due to the lack of influx of international students and less renters transitioning to homeownership in 2020 (CMHC). We’ve seen an increase from approximately 3000 people in 2016 to over 5000 people on the social housing list, which indicates decreased affordability and a need for housing. The average house price has gone up 60.5% since April 2020 and many expect home prices to continue to increase, as an initial influx of foreign investment in metropolitan areas like Toronto is now being compounded by the pandemic, resulting in a subsequent exodus of residents and capital, as asset-wealthy homeowners move to smaller markets to buy additional properties outside of the GTA. This is resulting in higher home prices and, in turn, decreasing affordability for renters, which impacts approximately 26% of people locally, who are now left to likely spend a disproportionate amount of their income on rent, while also not building equity and having less money to spend on consumer goods. In response, calls for increasing housing supply have become common.

However, the narrative that adding additional units will make prices affordable for renters is a fallacy: the free hand of the market will not simply produce affordable units at the lower end of the price spectrum when there is no market incentive to do so. In fact, all evidence points to the contrary.

Windsor will add approximately 500 units within the Downtown Community Improvement Plan area, which are subsidized by taxpayer dollars and have been posited to increase affordability. While this infill development is undoubtedly positive, as it will stimulate the downtown business district and increase density and tax revenue, many of these buildings are creating luxury units that will command market rates for higher quality spaces, effectively doing nothing for the lower price side of the rental spectrum. As tenants vacate pre-established, lower-priced rentals, through attrition or forced evictions, landlords increase prices to match current market rates often without increasing quality of supply. This is known as price gouging, where lower end rental rates become higher overnight, and is a phenomenon we are seeing occur in Windsor, in line with trends in cities like Toronto and Ottawa (ACTO, 2019). Dr. Mike Moffat, a Canadian economist and Professor in the Ivey Business School at Western University, said it best on Council Conversations: “the free market is not going to provide housing for the lowest income people that they would be able to afford. There’s just a shortage of land, an overall [sense that] if a home builder can build a more expensive home over a cheaper home and get more money for it, they will. So there’s going to be some inherent market failures there that only government is going to be able to fill in.” While the push to build more market-rate housing is a well-intentioned position, it cannot be a true solution to securing affordable housing in this current environment. Simply put, the only way to build more affordable housing is to mandate it.

This should be top of mind for all levels of government. There’s been some action by the federal government with the National Housing Strategy and some recent investment locally, such as a $25 million loan for 31 affordable units in a Tecumseh development, as well as Windsor City Council’s Meadowbrook housing and $170 million for the W-E Housing Corporation to repair units, but this is far from enough. Advocacy Centre Tenants Ontario (ACTO) presented a number of recommendations in 2019 to preserve affordable housing, which included vacancy decontrol legislation, centralized rental system, among other laws to be adopted at the provincial level. Other solutions include more controls on real estate purchases, investment in non-profit, cooperative housing organizations and community land trusts to preserve land costs, as well as mandating inclusionary zoning in new, high density builds across the province (which cities like Toronto are exploring). Governments could get back into the business of building and providing housing, like had been done previously, to keep units affordable for the segment of the population that will likely never enter the homeownership market (like the City of London recently committing to 3,000 in 5 years, with 300 units announced in first week).

There are many things we could be doing that will not negatively impact our housing market, but it will take money and political will. If Windsor is serious about maintaining and improving affordability, we need to move beyond the assumption that developers will solve the problem. The private sector has an important role to play, but we need to shift our focus to government action and investment, as that will be the only way to help those who the housing market has left behind.

Edited version appears in the Windsor Star on June 5th, 2021: https://windsorstar.com/opinion/letters/guest-column-governments-must-get-involved-as-lower-income-folks-struggle-in-housing-market