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Canada Can’t Find Enough Workers To Fulfill Trudeau’s Promise To Build More Houses

Canada Can’t Find Enough Workers To Fulfill Trudeau’s Promise To Build More Houses

The Bank of Canada has committed to trying to cool off the country’s housing market (and stem inflation more broadly) with a 50 bp rate hike, but PM Justin Trudeau’s efforts to try and undercut housing prices no matter the cost as mortgage debt surges has run into another obstacle that policymakers should have perhaps anticipated: in the country of nearly 40 million people, there simply aren’t enough workers to deliver on the Liberal Government’s plans.

Interestingly, this remains true despite the Trudeau government’s best efforts to try and spur immigration. Maybe they shouldn’t have alienated all of those blue-collar workers during the “Freedom Truckers” episode.

As for the government’s promises, boosting housing supply (via generous federal subsidies: the largest housing measure in the new budget is a C$4 billion – $3.2 billion) has been the centerpiece of the government’s plan.

Boosting supply was the centerpiece of the housing plan laid out in the Trudeau government’s spring budget. It said Canada has averaged around 200,000 new housing units annually in recent years and pledged to “double our current rate of new construction over the next decade.”

Unsurprisingly, a handful of analysts quoted by BBG have poured cold water on the government’s promises. Given the current rate of housing construction, doubling it simply isn’t feasible due to two primary reasons: skilled blue-collar labor is “scarce”, and municipal governments are prepared to fight any efforts to combat increased housing density (text courtesy of Bloomberg).

The plan quickly prompted skepticism from analysts. “Dollars to doughnuts this won’t happen, and not for lack of good intentions,” Robert Kavcic, senior economist with the Bank of Montreal, wrote this week in a note to investors.
Avery Shenfield, chief economist at CIBC World Markets, also doubted the feasibility of the plan given labor constraints: “Without a targeted immigration plan, or a concerted effort to convince young residents to consider taking up a hammer rather than a laptop, we’re going to continue to struggle to ramp up supply enough to allow more Canadians to own their own castle,” he wrote Thursday.

Trudeau appointee Ahmed Hussen, who is the current Canadian housing minister, has offered a feeble defense of the government’s promises, while trying to slough off blame on municipal governments. Here are some highlights from an interview he did with Bloomberg.

“The issue of housing supply is critical to our future success as a country,” Hussen said in an interview with Bloomberg. Hussen said he knows this skepticism is out there, but argued his government has already shown it can deliver on ambitious programs. Last year the Liberals pledged to get every province to sign on to a universal child care program, and they got the final piece in place last month when Ontario agreed.
“Skepticism can be expressed, but the fact is we have shown a track record and an ability to build and collaborate with other orders of government,” he said.
“You have to demonstrate the political will to tackle those barriers,” Hussen said of municipalities. As examples, he pointed to zoning changes to allow for more density near transit stations and requiring affordable housing in new developments.
“If they’re not willing to do any of those, or even present a credible plan to tackle these barriers, then we simply will not engage,” Hussen said. “But I believe that all municipalities will welcome this,” he added. The program has support from the Federation of Canadian Municipalities and the big city mayors’ caucus, Hussen said.

Canadian housing prices were already high before the pandemic, but they rose more than 50% during the past two years due to similar factors that drove US housing prices higher as well.

Source: Bloomberg

The price surge has become a critical political issue for Trudeau, and his conservative opponents are already seizing on it to hammer him and his Liberal government. The big question now is whether he will be able to tackle it before the next federal election in October 2025.

Tyler Durden
Sat, 04/16/2022 – 21:00

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