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Policy Pulse: The most interesting part of the Conservative housing plan is buried deep in the platform

News

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.

5:00 p.m. — Daily recap: Campaigns focus on housing and corruption on Day 4

Conservative leader Erin O’Toole promoted his plan to tighten lobbying, ethics and conflict of interest rules and NDP leader Jagmeet Singh turned the focus onto housing in Day 4 of the campaign. Here’s the rundown, with more news and analysis below.

  • Speaking in Quebec City, O’Toole said he would raise the maximum fine for ethics violations from $500 to $50,000 and close loopholes in the lobbying process.
  • In Burnaby this morning, Singh promised to implement a 20 percent foreign buyers tax on the sale home to people who are not Canadian citizens and also pledged to build half a million affordable housing units over the next 10 years.
  • Inflation numbers came in higher than expected Wednesday morning, allowing the opposition leaders to tee off on the cost of living.

4:00 p.m. — The most interesting part of the Conservative housing plan is buried deep in the platform

The Hub contributor Ben Woodfinden takes a look at the Conservative housing plan:

There’s a lot to digest in the Conservative platform, but one standout item is the party’s housing promises. It presents a direct contrast to the NDP housing promises announced today and examined below on this live blog.

Pro-housing advocates have been screaming for years that the best way to solve this crisis is with a supply side solution. We simply need to build more housing.

Politicians have preferred to focus on the demand side of the equation, but pumping more capital into an already over-juiced market, with things like the first time homebuyers credit, just further increases prices.

To their credit, the Conservatives haven’t done that and have a lot to say about supply side solutions.

They’ve promised a plan that will build one million homes in the next three years. They bury the most significant way the federal government can help do that in a subpoint, but its still significant.

They say that they will “require municipalities receiving federal funding for public transit to increase density near the funded transit.” This, more than anything else, can help move the needle on housing supply.

3:00 p.m. — Parliament’s dissolution ends the AG’s lawsuit against the Speaker

The Hub contributor Gerard Kennedy reminds us about an important lawsuit against the Speaker of the House of Commons:

Last month, I explained the implications of the Attorney General of Canada’s lawsuit against the Speaker of the House of Commons. I argued that the lawsuit was inappropriate and the Federal Court should promptly dismiss it, though Parliament ignoring a court decision would nonetheless be deeply problematic.

Yesterday, the legal saga came to an end as the Attorney General discontinued his case. Parliament’s dissolution rendered it moot.

This is entirely appropriate. The Speaker’s order that the Attorney General challenged has no effect now given Parliament’s dissolution. Moreover, courts should not be using their scarce resources to decide moot matters, save in exceptional circumstances.

Having said that, one might perceive that the proceeding was brought to avoid compliance with the Speaker’s order pending Parliament’s dissolution. Hopefully, this is not the case. Attorney General David Lametti has asserted that he played no part in the decision to bring the lawsuit. The Attorney General personally is rarely involved in making litigation decisions undertaken by his office.

But the perception that inappropriate litigation has been brought for strategic purposes can be as great a problem as the reality.

Even though the case was proceeding promptly, the short delay in resolving it was consequential — there will now never be compliance with a ruling of the Speaker of the House of Commons.

2:30 p.m. — Do real estate taxes on foreign buyers actually work?

The Hub’s content editor L. Graeme Smith looks at the research on foreign buyers taxes in real estate:

In a report for the University of Toronto, Josh Gordon concludes that foreign ownership is indeed exacerbating the problem of surging prices in two of the most expensive real estate markets in the country, Vancouver and Toronto.

Foreign ownership is decoupling the housing market from the labour market and elevating costs beyond what local incomes can afford, he writes. 

In response, both markets introduced new real estate transfer taxes that targeted foreign buyers. Vancouver implemented its Foreign Buyers Tax in 2016 at a rate of 15 percent, and later increased it to 20 percent in 2018. 

Toronto followed suit with a similar measure, the Non-Resident Speculation Tax, at 15 percent in 2017.

The taxes affected housing prices and the number of transactions.

In research for the University of Ottawa, Zachary Thurston found Vancouver’s tax initially decreased the monthly percentage change in housing prices by 1.73 percentage points, and, then later by 1.43 percentage points. 

It also decreased monthly transactions by 24 percent, and later by 30 percent.

He found an equivalent effect in Toronto, with decreased monthly transactions estimated at 38 percent. 

In terms of prices, he found that the Foreign Buyers Tax and the Non-Resident Speculation Tax reduced the monthly percentage change in prices of single-family homes by 2.40 and 4.21 percentage points respectively.

It remains to be seen if similar policies on a national scale would have the same effect, but these local effects are evident in two of Canada’s largest cities.

2:00 p.m. — The difference between ‘housing affordability’ and ‘affordable housing,’ and why it matters

The Hub contributor Chris Spoke untangles some key housing market terms:

We’re starting to hear more about housing and housing policy from all federal parties in the election campaign.

To make sense of their talking points and proposals, it’s important that we distinguish between “affordable housing” and “housing affordability.” These terms might sound like they refer to the same thing, but they don’t.

“Affordable housing” generally refers to housing that is priced below the market rate, whether for sale or for rent. This can be housing that is supplied by the private sector and subsidized by the government, or housing that is supplied directly by the government (for example, social housing).

“Affordable housing” is generally made available only to lower income households that qualify through an application process, a lottery, or some combination of the two.

“Housing affordability” generally refers to people’s ability to afford housing. The larger the group of people that can afford housing, the more affordable it is.

For example, more households can afford to pay $2,000 than $3,000 per month to rent a 2-bedroom apartment. When it comes to “housing affordability,” the less expensive, the better. That’s something Canada has been struggling with recently.

1:30 p.m. — NDP housing plan is very ambitious and the price tag could be high

The Hub’s editor-at-large Sean Speer examines today’s NDP housing announcement:

The NDP’s housing policy announcement comes the same day that Statistics Canada reports that its homeowners’ replacement cost index (which aims to measure the cost of new homes) increased by 13.8 percent year-over-year in July, which is the largest annual increase since 1987.

The question, of course, is: will the NDP’s proposals help to address rising unaffordability challenges in many Canadian cities?

The first proposal, a 20-percent tax on the sale of homes to people who are not Canadian citizens or permanent residents, aims to address perceived concerns about demand-driven increases to housing costs. This policy would essentially nationalize similar policies in place in parts of British Columbia and Ontario. It’s difficult to judge the efficacy of these provincial policies at this stage or to assess what the effects may be when implemented nationally.

Although most policy observers believe that a lack of housing supply is the main driver of our housing unaffordability challenges, there may indeed be a case that a combination of the high concentration of immigration in small number of major cities and even foreign speculation is contributing to the problem.

A national foreign buyers tax may help on the margins with the second issue. But addressing the first one would require new and different thinking about Canadian immigration policy which is not part of the NDP’s proposal.

Its second proposal to “create at least 500,000 units of quality, affordable housing” targets the supply-side of the housing market — though it prioritizes social housing part units rather than the market-based housing units.

A commitment to build half a million homes (including 250,000 in the next five years alone) is highly ambitious relative to the current National Housing Strategy which only aims for “up to 100,000 new housing units and 300,000 repaired or renewed housing units” over a ten-year period.

The NDP proposal is presently un-costed — its individual and overall platform costs are to follow — but if the National Housing Strategy’s 100,000 new homes will cost as much as $40 billion, then one can assume that five times the number of new homes will presumably cost a great deal more.

1:00 p.m. — Where the parties stand on foreign buyers in real estate

With NDP leader Jagmeet Singh pledging to implement a 20 percent foreign buyer’s tax, it’s worth looking at where the other two major parties stand on the issue.

In the platform released on Monday, Erin O’Toole’s Conservatives promised to ban foreign investors who do not live in Canada from buying homes for a two-year period. After two years, the potential buyer’s status will be reviewed.

The Conservatives say they will encourage foreign investment in affordable “purpose-built rental housing.”

In the spring budget, the Liberals brought in a one percent national tax on vacant homes owned by non-Canadians who do not live in Canada, which will come into effect on Jan 1, 2022.

12:00 p.m. — NDP promises 20 percent foreign buyers tax on home sales

NDP leader Jagmeet Singh was in Burnaby today promising to levy a 20 percent foreign buyers tax on the sale of homes to people who are not Canadian citizens or permanent residents.

Singh also said an NDP government would build half a million affordable housing units over the next 10 years.

11:25 a.m. — Inflation numbers are being driven by shelter, transportation and food prices

11:00 a.m. — Based on their promises, the parties are effectively ignoring the inflation bogeyman

The Hub contributor Rob Leone examines how today’s inflation numbers will play out on the campaign trail:

Statistics Canada released its monthly Consumer Price Index this morning. The CPI measures the average change in prices over time that consumers pay for certain goods. It is the measure that is mostly widely used to measure inflation.

The July 2021 figure is 3.7 percent over the July 2020 figure. Given that the Bank of Canada has an inflation target of two percent with a target range of one to three percent, the July figure is considered high and outside the target range, which is a concern.

How the inflation data plays out on the campaign trail remains to be seen. All the parties are proposing policies that will further put pressure on consumer demand for goods. The expected tax credits that are being sold to make life more affordable for things like energy, homes, and mobile phone plans, as well as massive spending on things like infrastructure that will only fuel a red-hot construction sector, suggests that parties are effectively ignoring the inflation bogeyman.

Complicating the inflation question is how a fourth wave of the COVID-19 pandemic will affect economic output and consumer spending. If the Bank of Canada needs to raise interest rates to control consumer demand, any expected personal benefits to announced tax credits over the next 30 days could be erased by increased borrowing costs.

9:00 a.m. — O’Toole promises new anti-corruption law

Conservative leader Erin O’Toole was in Quebec City this morning to propose an anti-corruption act that would “close loopholes in lobbying,” increase transparency and significantly hike the penalties for ethical violations.

O’Toole said the new rules were necessary in the wake of the three ethics investigations conducted during Liberal leader Justin Trudeau’s tenure. O’Toole argued that the current penalties were far too low to deter ethical behaviour and proposed a maximum fine of $50,000 dollars that would apply to all ethical violations.

The new law would also ensure cabinet confidence won’t be used to protect “the high-placed friends” of elected officials, said O’Toole.

O’Toole said his plan was reminiscent of the Accountability Act, which was enacted by Stephen Harper’s Conservative government after beating a Liberal Party that was reeling from the sponsorship scandal.

7:00 a.m. — Today’s events for the party leaders

Conservative leader Erin O’Toole will be in Quebec City to make an announcement at 9 a.m. ET.

NDP leader Jagmeet Singh will make a housing announcement in Coquitlam, British Columbia at 9 a.m. local time (noon ET).

Liberal leader Justin Trudeau will make an announcement in Vancouver at 9 a.m. local time (noon ET).

Policy Pulse: Howard Anglin: Whether we recognize the Taliban or not, Afghan politics will flow through Islamabad

News

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.

4:00 p.m. — Howard Anglin: Whether we recognize the Taliban or not, Afghan politics will flow through Islamabad

The Hub contributor Howard Anglin examines today’s foreign policy news:

Conservative leader Erin O’Toole and Liberal leader Justin Trudeau have both announced that a government led by them would not recognize a Taliban government in Afghanistan.

Last night O’Toole added that he would make sure aid to the Afghan people does not end up in the hands of the Taliban. When the Taliban first took power in 1996, we hadn’t had diplomatic relations with Afghanistan for 17 years, so this would be a return to that status quo ante.

How long this lasts will depend on the rest of the world, not Canada. For comparison, after the Iranian revolution of 1978-79, Canada closed our embassy in Tehran in 1980 but we eventually sent an ambassador to the Islamic fundamentalist regime in 1990.

The U.S. has never resumed diplomatic relations with Iran, but it does meet and negotiate with them out of necessity, recognizing their de facto status as government if not their legitimacy. And the Islamic Republic of Iran is recognized by the UN.

In the case of Afghanistan, Canada severed diplomatic ties in 1979 when the Soviets installed a puppet government under Babrak Kamal and didn’t restore diplomatic ties until after the 2001 invasion that ousted the Taliban for the first time. During the Taliban’s previous time in power, from 1996-2001, Canada provided aid to the Afghan people but did not recognize the Taliban government. Presumably that state of affairs is what O’Toole and Trudeau contemplate returning to.

The problem Canada and the world face with Afghanistan is that under the new Taliban government, it is effectively a client state of Pakistan and a target for indirect Chinese influence (and, to a lesser and more complicated degree, Russian influence).

For the foreseeable future, Afghan politics will flow through Islamabad and Canada could do more than any party has currently announced to organize international pressure against the Pakistan government.

3:00 p.m. — Trevor Tombe: Crunching the numbers on the proposed ‘GST holiday’

University of Calgary economist Trevor Tombe evaluates the proposed GST holiday:

The Conservative Party of Canada proposed today a one-month “GST holiday” in December where “all purchases made at retail stores will be tax free.” While some details remain to be determined, and some technical issues may arise, the implications of such a holiday for households and the economy can be broadly mapped out.

Not all goods are subject to GST. We don’t pay GST, for example, on most groceries, prescription drugs, hearing aids, music lessons, and more. And the proposed GST Holiday appears to apply only to purchases from retail outlets, which means some items like new home purchases won’t be affected. But for all other goods, Canadian consumers can expect a five percent savings on any purchases made that month. Overall, this tax reduction is potentially valued at roughly $4 billion. (It’s uncertain because consumers will respond by shifting their spending across months.)

What does this mean for household pocket books? The average household spends approximately $180 per month on GST. Below I illustrate these savings across all households. Savings are larger for households with higher incomes (they buy more taxable goods and services, after all) but savings are a larger fraction of household incomes at the lower end of the income distribution. This makes the proposal a progressive tax change. Those households with incomes below $30,000 per year may see savings equivalent to approximately 0.4 percent of income, or roughly double the overall average.

What effect might this have on the broader economy? That’s tough to say. Evidence from Saskatchewan produced by Finance of the Nation co-director and University of Toronto professor Michael Smart finds retail sales respond to tax rate changes — though this is not in the context of a one-month holiday. That is, lower sales taxes may lower prices and boost retail sales. Evidence on tax holidays from other jurisdictions suggests consumers will shift their spending (see this analysis for sales tax holidays in Massachusetts), which could potentially accelerate (or at least move forward) recovery in Canada’s retail sector.

2:30 p.m. — Samuel Duncan: Early signs indicate the major parties are being flexible on child care

The Hub contributor Samuel Duncan looks at how the two major child-care plans could work:

Today, Liberal leader Justin Trudeau re-affirmed his commitment to reduce average fees for childcare by 50 percent in the next year and introduce childcare agreements with the provinces and territories that would bring the average cost to $10 per day within five years.

Despite the political rhetoric of the campaign, no party is denying that childcare costs or the impact they have on the participation of women in the labour force are not a major concern for Canadian families. Conservative Party leader Erin O’Toole outlined his party’s approach which would introduce a refundable tax credit of between $4,500 and $6,000 per child, aiming to cover up to 75 percent of child-care costs for low-income families.

This demonstrates that politicians understand the important role that family plays in our society and our economy, even if there is debate on how that support is allocated.

In the case of the Liberal policy, we have the benefit of looking at what details are publicly available from the provincial agreements that were signed prior to the election. It appears that the Liberals are comfortable with federal support going towards early childhood learning, not just childcare, as in the case of the deal Saskatchewan signed (where children in registered activities up to the age of 6 are eligible for the support).

It will be interesting to see if Saskatchewan is able to use federal money to fund primary provincial education programs (as most four-and five- year-olds are in junior and senior kindergarten), which potentially could free up provincial fiscal resources to be allocated directly to parents and families who do not use regulated childcare options.

Provincial flexibility in the funding agreement could potentially explain why conservative premier’s have been willing to sign agreements with a Liberal federal government despite their hesitation about a one-size-fits-all model of childcare.

It is then possible that the result of these federal/provincial agreements could mean that both the Liberal plan and Conservative plan would stand to benefit middle-class families who choose non-regulated forms of childcare. However, it could mean that, if the Liberals are re-elected, provincial governments may be the ones who are able to take the credit for it.

1:30 p.m. — GST holiday could encourage spending, research suggests

With the Conservative Party proposing a “GST holiday” in December to help boost the economy, there is research suggesting that these kind of tax cuts do get passed along to the consumer and encourage spending.

“A GST cut would encourage consumers back into stores and to take vacations, thus unlocking some of the extraordinary level of personal savings accumulated during the pandemic,” wrote Michael Smart, the co-director of Finances of the Nation and professor of economics at the University of Toronto.

One month might not be long enough to have the intended economic effect, though. Canadians could simply plan to make pre-existing purchases in December, rather than increasing their spending overall.

The solution to that would be to extend a GST holiday for a long period of time — Smart recommends an 18-month window — and then temporarily increase the tax when the holiday is over, spurring Canadians to front-load their spending.

“That would give consumers even greater incentives to spend their savings now, as well as generating revenue later to help restore fiscal balance,” wrote Smart.

Smart calculates that a 18-month GST holiday would cost the government $36 billion.

1:05 p.m. — O’Toole announces plan for GST holiday in December

Conservative leader Erin O’Toole was in Toronto today to announce that he would implement a month-long “GST holiday” in December to juice retail sales as the country recovers from the COVID-19 pandemic.

O’Toole estimated the “tax holiday” would save Canadians $1.5 billion.

11:55 a.m. — Estimating the cost of a national, $10/day childcare system

The Liberals government has made $10/day childcare an early priority. But how much would such a program actually cost? 

A Cardus report examining the proposal as laid out in the last federal budget suggested the Liberals could be underestimating the true costs of their five-year plan. 

The study, titled Look Before You Leap: The Real Costs and Complexities of National Daycare and authored by Andrea Mrozek, Peter Jon Mitchell and Brian Dijkema, attempts to incorporate assumptions primarily relating to staff-to-child ratios, per-space payments for home daycares, square footage per child, and Early Childhood Educator salary growth.

On the low end, they calculate that the program costs will come in at $17 billion total in year five, with the federal contribution being $9.2 billion and parents covering $3.6 billion through user fees. This leaves a remaining $4.2 billion that will most likely be left to the provincial governments to fund. 

On the high end, they estimate the cost at $36.3 billion total in year five, with the federal government again covering $9.2 billion and parents covering $3.8 billion through user fees. The provinces must then cover the remaining $23.3 billion in this scenario.

11:20 a.m. — Peter Jon Mitchell: Child-care plans should prioritize flexibility and fairness

Peter Jon Mitchell, the family program director at Cardus, weighs up the three major child-care plans:

The party that forms the next government will commit substantial federal dollars to child care. The question is whether money will go to spaces or to parents.

The Liberal plan promises $30 billion over five years to cut parent fees in licensed care by half by the end of 2022 and to an average of $10-a-day by 2026. This would help the minority of families with kids in licensed care.

The Conservatives have countered, promising to replace the federal Child Care Expense Deduction with an Ontario-style refundable tax credit. The geared-to-income credit allows parents to choose the care that works for their family, recouping up to 75 percent of child care costs with the program paying out over the year. The claw back likely begins around $50,000 annual household income and phases out completely at $150,000 annual household income.

The NDP platform is light on details, but champions a fully public, universal child care program.

Fully flexible and fair child care policy would recognize that child care is the care of a child, no matter who provides that care. So far, no political party has embraced that important principle.

10:50 a.m. — Trudeau highlights $10/day child-care plan in Ontario

Liberal leader Justin Trudeau was in Markham, Ontario this morning to highlight the $10/day child-care program that was announced in the spring budget.

Before Parliament was dissolved on Sunday, the government was in the process of negotiating funding deals with the provinces and territories to implement the plan. On Friday, Saskatchewan became the latest province to ink a deal that would create the subsidized spots by 2026.

The government of Ontario, where Trudeau is campaigning today, has not signed an agreement with the federal government but the Liberal leader expressed optimism about a deal getting done.

7:00 a.m. — The leaders spread out for the second full day of campaigning

Liberal leader Justin Trudeau will make an announcement about support for Canadian families at 10 a.m. in Markham, Ontario.

Conservative leader Erin O’Toole will make an announcement at 1 p.m. ET in Toronto.

NDP leader Jagmeet Singh will propose a job creation plan at 9 a.m. local time (noon ET) in Coquitlam, British Columbia.

Green Party leader Annamie Paul will make an announcement at 12:15 p.m. in Toronto.