Sleeping in the belief that they are counting the right things, decision makers think their actions are working.
Putting ‘celebrating’ and ‘stalling housing prices’ in the same phrase will probably ensure that people read at least a few pages of Generation Squeeze’s new report: Celebrating Stalling Prices for Canadian Homes (Celebrating).
Celebrating identifies that homeowners across the country have been the beneficiaries of rising home prices since the 1970’s, especially in British Columbia and Ontario. For this reason, it is very easy to understand why individual homeowners would not welcome stalling home prices as they have benefited enormously from the steady increase in the value of their homes. But the authors of Celebrating make the case that stalling and even lowering prices is needed to make all residents and the country stronger.
There are lots of reports that discuss the crisis generated by the high cost of housing, both for owners and renters. Celebrating stands out because it talks about how Canada’s cost of living index has steered decision makers and policy makers wrong. As constructed, the cost of living doesn’t reflect the element of purchasing a home. The omission means that the cost of living index has been under-reporting the impact of changes in house prices.
The Bank of Canada monitors inflation to adjust interest rates. When inflation is high, the Bank raises interest rates to bring inflation under control. Celebrating says that the Bank has been misguided by the existing inflation measure. If purchasing a home had been part of the inflation calculation, the authors believe that the Bank would likely have made different decisions about interest rates over the last 50 years.
This report highlights the value of using data to inform decision-making. It also illustrates the benefit of assessing programs to find out whether they cause harm.
Celebrating makes recommendations to curb the impacts of housing inflation, following three principles:
- Housing is a human right.
- We need to make room for everyone.
- We should treat housing more as a place to call home, and less as a way to get rich.
This isn’t a simple matter that will be solved by the proverbial ‘silver bullet.’ Instead, Celebrating employs the image of ‘silver buckshot’ to outline the array of program and policy changes that are needed. The first is to change how housing inflation is measured and reported.
You can read the full report at Generation Squeeze: Celebrating Stalling Prices for Canadian Homes
Canada is not the only country with a housing affordability problem and calls for reform. Try this example from New Zealand: Reviving Adam Smith