The complex relationship between housing affordability and economic productivity is deeply intertwined, and these two issues are becoming increasingly urgent. For years, policymakers in Canada have appeared indifferent to the growing housing crisis. However, with homes becoming increasingly unattainable and voter dissatisfaction on the rise, the push to find viable solutions has become more pressing.

The Bank of Canada’s Housing Affordability Index reveals that affordability is currently at its lowest point since the early 1990s, with home prices significantly outpacing income growth. This disparity has made it increasingly difficult for many Canadians to enter the housing market without taking on substantial debt. According to Oxford Economics, Canada will need to build 4.2 million new homes by 2035 to restore balance in the housing market. This target represents an increase of nearly 70% over the current construction rate. However, even with this substantial boost in housing supply, achieving affordability in high-demand areas like Toronto and Vancouver remains a significant

challenge, as demand consistently exceeds supply.

A key contributing factor to the affordability crisis is the stagnation of Canadian household income growth. As incomes have failed to keep pace with rising home prices, many households have become heavily reliant on debt, resulting in Canadian households being among the most indebted in the developed world. This reliance on debt has raised concerns that over-investment in housing is detracting from other

productive sectors, such as technology and intellectual property, which are essential for enhancing overall economic productivity.

To effectively address the issue of housing affordability, a dual approach is necessary. This approach involves not only ramping up the housing supply but also implementing policies that increase household income. Such policies could include boosting economic productivity, better integrating immigrants into the workforce, and investing in highgrowth sectors. By addressing both sides of the equation—housing supply and economic productivity—a sustainable solution to the housing affordability crisis can be achieved, supporting long-term economic growth.

Ottawa, ON July 12, 2024 - The Bank of Canada has reduced interest rates for the second month in a row, lowering its benchmark rate in an effort to control inflation while avoiding a recession. This morning, the central bank announced a further 25 basis point cut, bringing the overnight rate down to 4.50%. The decision comes amid signs of moderating inflation and a slowing labor market. In its statement, the Bank highlighted that inflationary pressures are easing due to excess supply, although rising rent and mortgage interest costs, along with other services, are counteracting this trend.

This rate cut is good news for variable-rate mortgage holders and borrowers with home equity lines of credit (HELOCs), as rates for these products are expected to drop accordingly. After maintaining the highest interest rate in over two decades from July of last year until this June, the Bank has now entered a rate-cutting cycle. This aims to achieve a "soft landing" by bringing inflation to its target without triggering an economic crash.

The overall consumer price index (CPI) fell to 2.7% in June, marking the sixth consecutive month of inflation within the Bank's target range of 1% to 3%. Although core inflation measures remain more persistent, the Bank's recent survey of consumers and businesses indicated that inflation expectations are likely to continue decreasing in the coming months. June also saw the second labor market contraction in four months, with the economy shedding 1,400 jobs. Royal Bank of Canada (RBC) assistant chief economist Nathan Janzen noted that this job loss "increased the odds" of a July rate cut.

The Bank of Canada's next rate decision is scheduled for September 4, and speculation about further cuts before the end of 2024 is expected to grow in the coming weeks.

New rules for Ontario real estate came into force that are meant to provide more clarity and choice for buyers and sellers. Phase 2 of changes under the act, which took effect Dec. 1, include the option for sellers to use an open bidding process, improvements to broker and brokerage disclosures, and ways to avoid conflicts on multiple representation. 

The open bidding option gives the seller the choice to disclose submitted bid prices to potential buyers, something they were previously banned from doing. Open bidding has been advocated by some as a way to reduce rampant overbidding in real estate and help reduce prices.

Other changes under Phase 2 include the ability to choose a designated representative. Previously, if the buyer and sellers' agents worked at the same brokerage, given the potential conflict of interest, it would fall under a multiple representation scenario.

Also in the Phase 2 changes are an amended code of ethics, new enforcement tools for RECO, and an information guide from the agency that prospective clients are to receive before they agree to having an agent represent them.
 

As environmental issues continue to be pushed to the forefront, sustainable housing solutions are becoming more and more important. Driven by growing environmental awareness and the promise of long-term economic benefits, both developers and buyers are increasingly prioritizing sustainability.

Green technologies and sustainable materials in property development lead to energy-efficient, high-value properties. Consumers are attracted to the long-term cost savings and lower carbon footprints. Buyers are willing to pay more for sustainable features. Examples include solar panels for renewable energy, energy-efficient appliances, rainwater harvesting systems, insulated windows and doors, smart thermostats, native landscaping, and electric vehicle charging stations.Eco-friendly properties lead to lower utility bills, improved air quality, and higher tenant retention rates. 

While there might not be specific federal tax breaks, various incentives exist at provincial and municipal levels. Programs like the Canada Infrastructure Bank and CleanBC Better Homes offer grants and funding for energy-efficient retrofitting. Check current government resources for the latest incentives in Canada.
 

Some Ontario cities want power to slap 'use it or lose it' penalties on stalled housing projects. At least 20 Ontario municipalities are so far away from reaching their provincially-mandated targets for new home construction starts that they have virtually no chance of hitting the mark, and will face stiff financial consequences in 2024.

Under current rules set by Premier Doug Ford's government, cities that fall short of the 2023 target for housing starts will not get any money next year from the province's $1.2 billion fund to help cover the costs of housing-related infrastructure.

One suggestion is for a sunset clause on housing projects, allowing municipalities to revoke planning approvals if construction hasn't begun within a specified time period. Another involves development charges, the fees that cities levy on projects to cover infrastructure costs.

There are various legitimate reasons why construction may be delayed after approvals, such as financing falling through, market demand shifting or construction costs rising.
 

There has been a rapid increase in assignment sales listings in the GTA. But what are assignment sales and what benefits do they provide to sellers and buyers?

An assignment is when a Seller sells their interest in a property before they take possession – in other words, they sell the "contract" they have with the Builder to a new purchaser. The Buyer of an assignment is essentially stepping into the shoes of the original purchaser. One major component of assignment listings is that they cannot be advertised on the MLS or on any of the major real estate portals. To find these listings, you would have to either turn to realtors in your network, or secondary advertising platforms.

Sometimes, the original purchaser doesn’t have the funds or can’t get the financing to complete the sale, and it’s cheaper to assign the contract to a new purchaser, than it is to renege on the sale. Assignment sales can allow buyers to purchase a property at a bargain price. Sellers have little leverage given that transaction numbers are low, interest rates are high and some sellers overcommitted to new projects with the expectation they would be able to reassign them at a profit. The seller would face financial issues if they fail to find a buyer.