Ahh, governing. It’s about responding to the “events” of the day, even if as a prime minister you came to office with a very different set of objectives. The first chapter of this year’s federal budget on housing is a terrific illustration of that.

Over the course of my career, from my time at the Treasury Board Secretariat, the Parliamentary Budget Office, and most recently as the  Financial Accountability Officer of Ontario, I have read a lot of federal budgets. But, I don’t remember any budget dealing so extensively with housing. But why now? It was not long ago that Prime Minister Justin Trudeau commented that housing was not a matter of federal jurisdiction.  

 But, events happen. When U.K Prime Minister Harold Macmillan was asked what was the greatest challenge for a statesman, he replied: “Events, dear boy, events.” A government’s ability to effectively respond to events is what we as electors are counting on when we elect one. 

The housing affordability crisis that we now face has been roughly 20 years in the making. It was about then that housing supply started to lag housing demand, and the gap has been rising steadily ever since. The gap has largely been attributed to the lag in supply. Others have written extensively on how that’s been allowed to happen, including a 2022 report by the Province of Ontario’s Housing Affordability Task Force and the Smart Prosperity Institute. The report outlined 55 recommendations to increase the attainability of homes for rent and sale across the province.  

Our ability to “fix” the housing crisis is not a newfound thing. All levels of government have had the tools to do so. But “events” got in the way.  

A timeline of major “events”

In the early 1990s, governments were running very large deficits, to the point that those deficits became unaffordable. The “event” of the day was to get those deficits under control. As a consequence, the federal government stopped funding social housing in 1993. Provincial governments started to download social services to the municipalities, which included affordable housing. So housing supply at the lower-cost end of the market started to dwindle.

Fast-forward to this current Liberal government’s term of office. When the Trudeau government swept into power in 2015, among its (many) priorities, renegotiating NAFTA was not in their election platform. But with the election of Donald Trump as U.S. president, the government faced a critical test. The most important relationship for our economic growth and well-being was threatened. The renegotiation of NAFTA was a huge effort. I knew people intimately involved. It was a full-court press from all levels of government and from all parties. There wasn’t much disagreement on its importance, and behind the scenes anyway, it was almost a nonpartisan issue.  

When building their next platform for the 2019 election, the government could have never predicted the “event” that was the COVID-19 pandemic. Much has been said about COVID-19, but the aftereffects were also unplanned. Because governments around the world shut down their economies, supply chains got backed up, so economies suffered from lack of many things, from toilet paper to airline travel. Because most people were still earning an income, or being supported by a government program, there was still a reasonable level of spending in the economy.  

The resulting increase in the inflation rate was something we hadn’t seen for almost  40 years—yet another “event.” To tame inflation, the Bank of Canada raised interest rates to their highest level in about 30 years. All of this happened just between 2020 and 2024. Oh yes—Russia also invaded Ukraine. This was the first time a European country invaded another in many decades.

The other “event” has been a very significant increase in the rate of immigration. We live in a country whose fertility rate is lower than the replacement rate. We depend on immigration to support economic growth, which in turn helps governments pay for things like education and health care. However, unprecedented levels of immigration have also put a lot of strain on all government services and housing infrastructure. These services have not kept pace with the level of demand for many years.  

Hoping for housing

My assessment comes down to economic incentives. Those who currently own a home and benefit most from the rapid appreciation in housing prices are by coincidence the same people who have a significant degree of control over how much and what type of housing gets built. Compounded by a rapid increase in Canadian immigration is the significant population migration to large urban centres over the past quarter century, adding pressure to urban planning.

In Canada, and especially in Ontario, land use planning—the function of allocating land for housing and employment—is notionally under provincial jurisdiction. However, the nuts and bolts of building permits are actually handled at the municipal level. I have been fortunate, in my role as a member of the Peel Transition Board, to learn a lot about these nuts and bolts. And what I found most acutely is that, up until 20 years ago, planning departments actually had a culture of enabling housing. But that culture has changed to one that now inhibits housing growth.  

Given that municipal governments are highly responsive to their local constituents, why would this be? Political science teaches us that it is easier for constituents, be they individual cities or larger entities, to influence their political decision-makers in a smaller jurisdiction than a larger one. As a result, city councilors are very attentive to the needs of their constituents. This is a good thing in a democracy, but when it comes to housing it has resulted in not being able to “see the forest for the trees.”  

When it comes to housing, the result I’ve witnessed is an undue focus on protecting the “character” of a neighbourhood. This has meant protecting the value of the existing housing stock at the expense of making more housing stock available, at a more affordable price, to accommodate and encourage population growth. When we price people out of the housing market, they will eventually find somewhere else to move. When we live in a country whose population is aging. This puts added pressure on government-provided services such as health care and pensions.

When we live in a country where the natural rate of population growth is below the replacement rate, we rely on immigration to ensure population growth, economic growth, and an increase in our standard of living. We, who have benefitted from the rapid appreciation of the value of our homes, are dependent on the next generation to provide for us, as our productive capacity starts to decline along with our health. This is the “forest.” Our home prices are the “trees.”  

Events…The federal government is trying to address this latest ”event” in its budget. From a government whose prime minister at one point did not consider housing to fall within his jurisdiction, to now that same prime minister who has put forward a wide-ranging set of policies designed to increase housing supply and to try to make housing more affordable for future generations. Let’s see if it works.

Last week, The Hub was home to a wonky yet important debate about how to reform the federal government in order to improve its capacity for policy development and implementation. 

The debate started when former Ontario government political aide, Andrew Evans, and I published an essay in favour of a new public administration model within the Prime Minister’s Office that would involve the establishment of a National Economic Council and Domestic Policy Council comprised of relevant cabinet ministers, public servants, political staff, and possibly non-elected appointees, and supported by a dedicated PMO staff, with the mandate to strengthen policy capacity and implementation oversight on behalf of the prime minister. 

Although we recognize that such policy councils would likely contribute to a further centralization of the federal government, we argue that (1) the trend towards centralization has been unabated for decades and so there’s a good case that we ought to organize ourselves around it rather than simply lament it, and (2) in a world in which most major policy initiatives will necessarily involve multiple departments and agencies, then centralized oversight is really the only way to ensure successful implementation. 

The second point is worth emphasizing: as former political advisers, we’ve both experienced the challenges of achieving policy progress in a governmental structure that’s inherently siloed with ministerial responsibility limited to one’s own portfolio. Multi-departmental policy agendas tend to end up orphaned and suboptimal in such an environment. This is an institutional failing.

PMO policy councils, which would involve direct representation from the departments involved in multi-departmental initiatives, represent in our minds the best way to institutionalize the whole-of-government focus necessary to successfully deliver on such initiatives. For those within the “Ottawa bubble”, one might think of them as something like institutionalized, permanent, and sophisticated “four corners meetings.” 

We should also emphasize for those concerned that such councils couldn’t themselves become critics of the government. They wouldn’t be responsible for producing public-facing policy research or communicating publicly on behalf of the government. They would instead be internal councils designed to improve policy development and implementation within the government itself. In practical terms, they would strengthen the prime minister’s capacity to develop his or her own policy ideas, pressure test ones that come from within government departments or external sources, and coordinate the implementation of multi-departmental initiatives. For this reason, we referred to these policy councils as “do tanks” rather than “think tanks.” 

The proposal received a thoughtful rebuttal on Wednesday from former clerks of the Privy Council, Kevin Lynch and Mel Cappe, and former assistant secretary to the cabinet, Jim Mitchell. If one is going to have critics, this is a pretty strong group. 

Although they agree that public administration reform is needed, they push back against the proposal for policy councils housed within PMO. Their principal concern is that it would contribute to a further centralization of the federal government and in turn undermine the principles of cabinet government and ministerial responsibility. They would instead prefer a return to an era of strong cabinet ministers like C.D. Howe, Don Mazankowski, and Paul Martin. 

One can accept that there’s an inherent trade-off here and that our proposal comes with such a risk. But my response to Cappe, Lynch, and Mitchell (whom it must be said I respect a great deal) would be multi-fold:  

• Our proposal aims to see the world as it is in which there’s clearly a significant gap between the decentralization of policymaking capacity and the centralization of decision-making within the federal government. Their response, by contrast, proposes to return to a system that hasn’t practically existed for several decades. That they cite Jeffrey Simpson’s two-decades-old book, The Friendly Dictatorship, is a sign that the change that they champion is unlikely to come. 
• They make a big deal about the fact that the policy council model derives from the U.S. presidential system and therefore is somehow incompatible with Canada’s Westminster model. But as they no doubt know, one of the strengths of the Westminster model is its inherent flexibility. For instance, there’s only statutory cabinet committee in the federal system is the Treasury Board. The prime minister otherwise has tremendous scope to organize his or her government as they see fit. One can envision PMO-based policy councils working in parallel with Canada’s system of cabinet governance such that the councils could help to inform cabinet decision-making and then support the implementation of its decisions. 
• This is a big one: Cappe, Lynch, and Mitchell fail to grapple with the inherent challenge of successfully implementing horizontal policy initiatives in an inherently siloed system. One can point to various instances where it has directly contributed to governmental failures. For instance, during the pandemic, one part of the government entered into a vaccine agreement with a Chinese-state-based supplier at the same time that another part of the government believed that the Chinese state was involved in acts of bio-espionage at the Winnipeg Lab. The failure of these different parts of the government to communicate with one another was not only the source of great embarrassment but it delayed Canadians’ access to a vaccine. Ottawa needs a better mechanism to pull together different expertise, information, and policy tools into a more coherent form of governance. In the absence of centralized coordination, our experience is that the inherent structure of government represents a significant impediment to progress on multi-departmental initiatives. 
• Yet, as mentioned above, there are few policy issues facing the country today that fit neatly within the Financial Administration Act or other statutes that govern the basic functioning of the federal government. Climate change, aging demographics, Indigenous reconciliation, national security reform, a pro-growth and productivity agenda, and even a policy response to a new Trump administration will require a whole-of-government agenda. Who is going to organize and coordinate such an agenda? An individual line department? The answer is “clearly, it is not.” 
• Which prompts the question: who is it going to be? If I didn’t know any better, I’d wonder if implicit in their analysis, Cappe, Lynch, and Mitchell would simply prefer if it’s the Privy Council Office itself. For others, anyway, the principle (and unsaid) concern might be more about an expanded role for the political arm of the government relative to the public service than it is about restoring the principles of cabinet government and ministerial responsibility themselves. Yet it must be remembered that while the federal public service is comprised of some great people, it’s far from infallible. The status quo in which the political arm of the government has asymmetrical capacities and resources relative to the public service—particularly in the face of the massive expansion of the federal employment footprint—has produced an overdependency problem including a lack of checks and balances. PMO-based policy councils with dedicated policy staff would create a healthy tension with the system that, based on our experiences, would produce better policy outcomes. 

The upshot: although we’re honoured to have critics like Cappe, Lynch, and Mitchell, we’re ultimately unpersuaded by their rebuttal. We commonly agree that reform is needed. But we disagree about what form it ought to take. We’d argue that our practical proposal better reflects the current federal system and the challenges that it faces than their proposal to return to a distant past no longer up to meeting today’s challenges.