Does building more market-rate housing make the whole market more affordable?

Welcome to The Hub’s Federal Election 2021 Policy Pulse, where we’ll be tracking all the policy announcements from the major parties, with instant analysis from our crew of experts.

With the election scheduled for Sept. 20, we’ll be monitoring 36 days worth of policy ideas, so watch out each morning for the day’s live blog where we’ll be tracking every announcement as it happens.

4:30 p.m. — Does building more market-rate housing make the whole market more affordable?

The Hub’s content editor L. Graeme Smith looks at a new report on the effect of market-rate housing construction:

Housing has been a hot topic in the first half of the campaign, with the NDP promising to build half a million affordable housing units over the next ten years and the Conservative’s pledging to build a million homes in the next three years. 

As Chris Spoke has observed, there is a difference between affordable housing and housing affordability. The NDP plan clearly focuses on the former, with all of its attendant costs, while the Conservatives have focused simply on building more housing overall.

Research highlights the merit of just building as much new housing as possible, regardless of the type. 

The Journal of Urban Economics recently released a report, The Effect of New Market-Rate Housing Construction on the Low-Income Housing Market, that found building more market-rate or luxury housing has the downstream effect of freeing up affordable housing for those that need it. When more expensive housing is introduced into the market, richer people move into these costlier homes, vacating the cheaper options. 

Author Evan Mast quantifies the effect:

“Constructing a new market-rate building that houses 100 people ultimately leads 45 to 70 people to move out of below-median income neighborhoods, with most of the effect occurring within three years. These results suggest that the migration ripple effects of new housing will affect a wide spectrum of neighborhoods and loosen the low-income housing market.”

You want to increase affordable housing options? Focusing on more housing in general appears to be a defensible tact to take.

2:30 p.m. — The Liberals are doubling down on digital policy

The Hub’s content editor L. Graeme Smith examines the digital policy section of the Liberal platform:

The Liberals (still) want to regulate the internet. 

Bill C-10, introduced in parliament by Canadian Heritage Minister Steven Guilbeault back in November 2020, set out a series of reforms to the Broadcasting Act in the name of speaking to the rise of online and digital content producers and providers. 

The crux of the issue is that the Broadcasting Act and its Canadian content rules were conceived in an era of 13 television channels and no longer reflect how Canadians produce, create, and consume content. The bill in effect sought to bring the Broadcasting Act into the age of Netflix and Youtube.

It proposed doing so by subjecting web-based content providers to the same regulations as traditional broadcasters. In effect, this would mean requiring them to offer certain amounts of Canadian content on their sites and financially contribute to the production of Canadian cultural industries.

It also meant to classify user-generated content posted to social media sites as broadcast content and would have required the Canadian Radio-television and Telecommunications Commission to regulate it much the same as it regulates radio and TV content now.

Critics of the bill worried that this was a substantial intrusion into the free speech rights of Canadians. Others were skeptical that Canadian contents were even required at all in the digital age. 

In addition to C-10, the government similarly tabled Bill C-36 which sought to combat online hate and was widely criticized for equating words with violence and having the potential to deter healthy discourse. 

Neither bill was passed into law prior to the election. 

The Liberal party is unchastened, though, as they have doubled down on their digital policy without reconsideration. Their party platform, released yesterday, has much the same promises around new cultural spending initiatives and internet regulations, including pledges to: 

• Within the first 100 days, reintroduce legislation to reform the Broadcasting Act to ensure foreign web giants contribute to the creation and promotion of Canadian stories and music

• Introduce legislation within its first 100 days to combat serious forms of harmful online content

• Strengthen the Canada Human Rights Act and the Criminal Code to more effectively combat online hate

For more discussion on the intricacies of these proposals, you can check out plenty of content here at The Hub, including: 

• Sean Speer on why regulating the internet for Canadian content producers is unnecessary
• Vass Bednar on the risks of Bill C-10
• Stuart Thomson on the unpopularity of Bill C-10
• Joanna Baron on the futility of Bill C-36
• A C.D. Howe discussion on the fundamental flaws of Bill C-10
• A breakdown of Cardus’ The Long Way episode on Bill C-10 
• A  breakdown of a Law Bytes conversation with a former CRTC Chair denouncing Bill C-10

1:00 p.m. — The Liberals and Conservatives are both promising an agency to bet on ‘wild card’ technologies

The Hub’s editor-at-large Sean Speer examines similar proposals from the Liberals and Conservatives:

Now that the Liberal Party has released its platform, we have the full policy platforms from the major parties to compare and analyse. (The Conservatives and NDP have yet to release the costing of their individual policy promises or their overall plans.)

One of the most interesting policy developments is that both the Conservatives and Liberals have committed to establish a new federal agency modeled on the Defence Advanced Research Projects Agency (DARPA) in the U.S.

The Conservative platform states:

If elected, Canada’s Conservatives will invest $5 billion over the next five years to fund programs aimed at making major advances in:

• Use of hydrogen
• Small Modular Reactors, including funding the work being done in Ontario, Saskatchewan and New Brunswick on nuclear energy technology and the work being done in Alberta on applying SMR technology to reduce GHG emissions in the resource sector
• Private sector innovation in the space sector
• Electric vehicle development and manufacturing, including electric trucks, micro-mobility, batteries, and parts manufacturers
• Pharmaceutical research and production

This investment will be managed by a new Canada Advanced Research Agency headquartered in Calgary, where it will take advantage of Alberta’s highly educated workforce and help diversify the Alberta economy.

The Liberal platform states:

[A re-elected Liberal government will] Establish a Canada Advanced Research Projects Agency (CARPA) as a public-private bridge for research that helps develop and maintain Canadian-led technology and capabilities in high-impact areas.

Modelled on the Defense Advanced Research Projects (DARPA) in the United States, which has helped pioneer the development of several iconic technologies, including GPS mapping, the agency would be established with an initial endowment of $2 billion.

This common promise has generated some attention from the news media and policy experts. Given the limited details in the two platforms, there are naturally questions about a Canada Advanced Research Projects Agency (CARPA)’s mandate, structure, and purpose.

The basic idea of DARPA is to finance and support high-risk, high-reward projects free from political interference or academic and bureaucratic capture. The agency’s success has been in large part a consequence of being highly disciplined in distinguishing between potential scientific and technological breakthroughs and incremental progress. The former are prospective DARPA projects. The latter are the purview of other federal agencies and programs.

A successful innovation ecosystem requires a combination of incremental and transformational innovation. Take climate change for instance. A February 2021 report by the Canadian Institute for Climate Choices estimated that “safe bet” technologies can contribute at least two-thirds of the emission reductions needed to reach Canada’s 2030 targets and at least one-third of reductions required to achieve the 2050 target of net-zero emissions. The rest of the progress will need to come from “wild card” technologies that are currently undeveloped or may not yet even exist.

Yet Canada’s science, technology, and innovation policy framework undervests in such high-risk, high-rewards inventions and instead tends to prioritize safe, incremental progress due to a combination of political economy factors including the gatekeeper role that leading scholars and scientists play in research funding and publication decisions.

If we are to create the conditions for “wild card” progress in areas such as direct air capture, carbon captured and storage, and other forms of industrial decarbonization, government policy will need to tilt more in the direction of catalysing such scientific and technological breakthroughs. A new CARPA can in theory play this role.

In practice, there will be various policy and governance issues that will need to be resolved in establishing a new, DARPA-like agency in Canada. A failure to properly address them risks producing the underwhelming outcomes that some critics have warned.

Replicating DARPA’s autonomy, independence, and discipline may be challenging based on past experiences including the small “p” politics reflected in the geographical and sectoral distribution of the superclusters. It’s also uncertain whether our system of politics and government can permit the sort of institutional energy and dynamism that has contributed to DARPA’s overall success.

The incoming government will need to think carefully about the full invention-innovation continuum so that promising inventions supported by CARPA aren’t stranded or merely sold off pre-commercialization to global firms. There are also outstanding questions about whether DARPA’s connection to the Department of Defense’s massive procurement budget is a contingent variable that cannot be replicated in Canada or elsewhere.

But it would be wrong to dismiss the Conservative and Liberal proposals for a new CARPA out-of-hand. The country and the world face enormous challenges — including climate change, the risk of future global pandemics, and the invariable health consequences of aging demographics — that require major scientific and technological breakthroughs to address them.

Catalysing such inventions in Canada can not only help us meet national interest goals (such as achieving net-zero emissions) but can ultimately produce commercial innovations for export to global markets.

It’s exciting therefore to see the major parties throw some “wild cards” into the campaign. The real work of translating the bet of a new research agency into a source of such breakthroughs will begin in earnest following the election.

11:30 a.m. — Why tonight’s Quebec debate is so important

The Hub’s editor-in-chief Stuart Thomson looks at the importance of tonight’s TVA debate:

Most days, the campaign schedules of the party leaders are full of events as they host major policy announcements in the morning and attend rallies with supporters in the evening.

Today? There’s an eerie silence.

NDP leader Jagmeet Singh will answer a few questions from the media, but mostly he’ll be serving poutine in Montreal and preparing for tonight’s French-language debate on TVA. Conservative leader Erin O’Toole and Liberal leader Justin Trudeau have no events scheduled and will be devoting their entire day to preparing for the debate.

In a campaign with only 36 days, it’s a huge decision to shun the usual campaign events for an all-day cram session and it speaks to the importance of the debate.

But why does it matter so much? Here’s three reasons the campaign are putting all their energy into this television event.

Quebec has lots of seats

Due to the complicated formula that divides the country up into ridings, Quebec has more seats proportionally than any other large province, making it a big prize for any party that makes inroads.

Although Quebec’s proportion of seats has gone down over the years, it’s still higher than that of Alberta, Ontario and British Columbia.

Quebec denounced the 2011 Fair Representation Act, which tweaked the rules for dividing up the country’s ridings, because the province believed it didn’t go far enough in preserving “the characteristics inherent to their collective status.” But the Act still kept the province’s seat count roughly proportional with the size of its population in Canada.

The other large provinces, Ontario, B.C. and Alberta, hold 63 percent of the population but have only 58 percent of the seats.

When the 2011 changes came into effect, Quebec had 23 percent of the population and 23 percent of the seats in the House of Commons. But that means the average Quebec riding had 5,562 fewer people than the national average when the new ridings were created.

Lots of ridings are up for grabs

It’s not enough for a province to have lots of seats to be electorally important. They also have to be winnable.

In Alberta, only a handful of seats are competitive, with the Conservatives running up huge victories in rural and suburban ridings. That’s led to relatively little campaigning in the province, with O’Toole and Singh visiting Edmonton once, and Trudeau not campaigning in Alberta at all.

Compare that to the eight visits the party leaders have collectively made to Quebec in just the first half of the campaign (and not including their current trips to Montreal for the debate).

In 2011, the NDP became the official opposition due to a surprisingly strong showing in Quebec and a Bloc Quebecois collapse. In 2015, the Liberals dominated the province with 40 seats and, in 2019, a resurgent Bloc Quebecois split the lion’s share of seats in the province with the governing Liberals.

Now, a Leger poll released today shows Liberal support tumbling and the Conservatives and NDP profiting.

This kind of volatility means strategists in every campaign will be dreaming of a strong debate performance that juices their party’s chances in the province.

The debates change the minds of Quebecers

History speaks loudly about the importance of the French-language debates and, unlike the English-language debates, we’ve seen some major poll movements in Quebec after these events. According to poll-watcher Philippe J. Fournier, the 2019 TVA debate torpedoed Andrew Scheer’s chances in Quebec and sparked a huge surge for Bloc Quebecois leader Yves-François Blanchet.

After an opening segment of the debate that centered almost entirely on Scheer’s position on abortion, the Conservatives lost five percentage points in Quebec polls and Blanchet’s Bloc gained 10 percentage points.

Polling analyst Eric Grenier also points out that Jack Layton’s 2011 surge in Quebec started after a strong debate and good performance on Radio-Canada’s Tout le monde en parle. Thomas Mulcair’s collapse in Quebec in 2015 also quickly followed middling performances in the two French-language debates.

9:00 a.m. — CANZUK proponents urge quality over quantity

Conservative leader Erin O’Toole will spend his day preparing for the Quebec debate on TVA tonight, but he posted a video on Twitter touting his plan for a CANZUK trade agreement with Australia, New Zealand and the United Kingdom.

The Hub contributor Brent H. Cameron examined this proposal earlier in the campaign, urging Canadians to focus on quality of trade, rather than quantity:

Arguments against CANZUK almost invariably take a quantitative approach to trade — a focus on the volume of trade, and the number of prospective new consumers for Canadian goods and services. This is how we rationalize any trade deal, by narrowly concerning ourselves with how much we can buy and sell.

Yet, if this was all there was to it, presumably globalization would be more popular than it is. Why is something that is supposed to be so inherently good for our economy face such opposition?

The perceived failure of globalization has not been one of maximizing the quantity of trading arrangements, but in ignoring their relative quality.

According to the Office of the U.S. Trade Representative, in 2017 the United States did nearly as much bilateral trade with China as with Canada — $659.4 billion compared to $662.7 billion.

Conventional wisdom holds that these relationships are equal. Yet, with Canada, the U.S. earned a surplus of $11.9 billion — the equivalent of $0.02 on the dollar. With China? A loss of $336.2 billion, or $0.51 on the dollar. Nearly the same amounts of two-way trade but a much different result.

The issue of comparing apples to oranges might hold if it were not for the fact that the U.S. numbers that same year for India — also in Asia, also a low-wage producer and with a billion people — produced a deficit to the U.S. equivalent to $0.35 per dollar.

So, what about CANZUK? Well, in 2015, Canada enjoyed an $11.9 billion surplus on $662.7 billion of combined bilateral trade with the other three countries, or 2 cents on the dollar — exactly the U.S. advantage over us two years later.

Compatibility makes America’s trade with Canada and India fairer than with China. It also makes Canada’s trade with the other CANZUK countries as close to full balance as one can get with such volumes.

7:00 a.m. — Where the leaders are today

Liberal leader Justin Trudeau will be preparing for the TVA debate in Montreal.

Conservative leader Erin O’Toole will be preparing for the TVA debate in Montreal.

NDP leader Jagmeet Singh will speak to the media at 11 a.m. in Montreal.