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Ginny Roth: Housing is going through a supply-side revolution. Can we do the same for childcare?

Commentary

PM Justin Trudeau looks on as Deputy PM Chrystia Freeland speaks at a local child care centre in Ottawa, March 29, 2023. Sean Kilpatrick/The Canadian Press.

According to a Canadian Press report from last month, in Kawartha Lakes, Ontario, “children are now set to spend an average of 6.4 years waiting for licensed child care, up from an average of 3.7 years in early 2022” before Ontario joined the federal child care program.

“I guess my kid will get a spot when she’s ready to start university,” goes the common refrain. The not-so-funny jokes write themselves. And they bear an uncanny resemblance, in theme and tone, to the dark humour that Canadians have been using to cope with the thirty-five-year-olds living in their parents’ basements because they can’t afford a home.

The similarities between Canada’s twin housing and childcare supply crises don’t stop there. Let me tell you a story.

First, a couple things happen at once. Governments—often local—pile on regulations and restrictions. They say these restrictions will protect society and initially, they don’t seem to do much harm. At the same time, some people (often wealthy) realize these restrictions can help them because maybe they have a vested interest the restrictions protect. But still, as a result, people don’t have the thing that they need, especially low-income people, so governments feel the need to respond. They can’t remove the restrictions—they’re protecting society after all! Also, the beneficiaries of the protections wouldn’t like it. And anyway, it would be hard.

Meanwhile, borrowing is cheap. Like, really cheap. So, governments decide to throw some cash at the problem. At first, people get excited. Maybe one of these new programs means they’ll finally be able to get that thing they can’t get. In fact, as the money pours out, more people realize they want the thing and might be able to reach it with the cash boost. The problem is, that thing they want? There isn’t more of it available. Even if it’s paid for, it just doesn’t exist. Meanwhile, governments keep adding new regulations and restrictions. Demand goes up. Supply goes down.

But it doesn’t stop there. People whose job it is to find business opportunities spot one. After all, where there’s high demand and low supply, there’s value. So private equity swoops in. They also use cheap debt to buy up what little is left of that thing people want so much of since they know they can ask a lot for it and won’t face competitive pressure to charge less. And who can blame them? It’s their job.

Meanwhile, other governments try to benefit politically from appearing to solve the problem, so they throw in more cash too. Joint announcements ensue, only to be followed weeks later by news stories pointing out that there still isn’t enough of the thing people want, and that every day, more people want it.

Finally, in the midst of all of this, as cash drives up demand, and regulation drives down supply, and you think things can’t possibly be made worse, every month, more and more people come to Canada. And what do those people want? In fact, what do they need? That’s right, the very same thing everyone else wants, and of which there is not enough. And now, relatively speaking, even less.

Is this story about housing or childcare? So far, it could very easily be both. Clever device, right? But here’s where the story splits off, where Canadians can choose their own adventure, where one story seems like it might have a happy ending, and where another seems to have no end in sight at all.

In the housing story, something changes. A new politician with big ambitions starts to look for ways to differentiate himself. Instead of worrying about the vested interests benefitting from the status quo, he sees political opportunity in the growing number of Canadians who can’t get what they want. And conveniently, he knows how supply and demand work. He starts explaining to Canadians what the nature of the problem is, and because they’re mostly smart, they get it and start to agitate for change. He designs policies that will incentivize local governments to fix the supply issue by telling them they won’t get funding from his level of government unless they do. As he does this, he becomes more popular, because wouldn’t you know it, the generation that can’t afford homes just recently became the biggest one in Canada.

So, what do the politicians who created the crisis do now that their opponent is getting more popular by saying he’ll fix it? Well, they copy him of course (or they try to). But it’s too little too late. Canadians have decided they want a high-impact supply-side solution to the housing crisis, and they think this new guy is the one who can deliver it.

Unfortunately for desperate Canadian parents, the childcare story is further behind. Childcare has been in short supply for a long time, particularly in areas with high demand. Where it is available, it’s expensive. Much of the expense of childcare delivery is intrinsic to the nature of its requirements. Especially for infants, it comes with high labour costs (babies need a lot of individual adult care and attention), and parents rightly want safe spaces and healthy food for their kids. This is why it’s worth subsidizing childcare for people who can’t afford it.

But when it comes to the childcare input costs—from labour, to buildings, to food—that make it not only more expensive but less viable as a business, the sector is plagued by some of the same tax and regulation challenges as housing. The carbon tax and other input costs that make food more expensive, development charges, municipal zoning requirements, and provincial licensing red tape all stand in the way of entrepreneurs trying to build and grow childcare centres, and labour regulations and credentialization make it impossible to find enough staff.

It was bad enough before the Trudeau Liberals launched their ten-dollar-a-day childcare program, otherwise known as Canada Wide Early Learning and Child Care. Then it got worse. CWELCC manages to both increase demand and supress supply by redistributing the money Canadians pay in taxes (including low-income people) to subsidize the cost of childcare spots down to ten dollars a day, not just for low-income people, but for everyone, even the wealthiest Canadians.

The regressive, demand-jacking economic program would be bad enough on its own. But on top of that, the program design (different depending on how negotiations went with each province), worsens the disincentive for small businesspeople to create centres and add more spaces. Childcare entrepreneurs, most of them women, report being berated by municipal civil servants for their profit-seeking motives and business choices, many of them forced to turn away countless families who will never make it off the endless waitlists, some of them opting out of the program altogether.

Some provinces and municipalities have been better than others. Alberta, for instance, has more choice and flexibility in its model, presumably influenced by the success of its education system which allows market forces to match supply with demand. Regardless, the principles of the federal program mean shortages persist across the country.

And the non-profit sector hasn’t helped, too often dogmatic about service delivery, insisting that non-profit centres are inherently better than for-profit businesses and advocating to bake that preference into program design, inevitably suppressing supply and exacerbating access issues which, ironically, hurt the low-income people who can’t afford alternatives the most.

All this to say, the childcare story today is the housing story at its worst. High demand, low supply, and public policy that exacerbates it all. Worse than that, so far, the childcare story doesn’t have a hero. There’s no forward-thinking white knight. At least, not yet.

Just as with housing, at first glance, childcare policy seems scary for politicians. The smart ones understand what the problem is, but they tend to be more sensitive to the politics around those families lucky enough to have found subsidized childcare spaces for their kids. Once you go ten dollars a day, you don’t want to go back. But thoughtful, politically savvy policy must not necessarily involve cancelling the current program and defunding the existing spaces. An innovative policymaker could take inspiration from Pierre Poilievre’s strings-attached housing policy. Perhaps he could take inspiration from himself.

Indeed, the CWELCC agreements extend into 2025 and 2026 and are then eligible to be renewed or renegotiated. It’s not hard to imagine an election commitment that says provinces can get their funding—for existing spaces, indeed, for more spaces—but they won’t get it unless they find a way to increase supply. And just as with housing, while federal politicians don’t need to be prescriptive, they can rest assured there are many ways to skin that cat.

While municipalities are tackling zoning reform for housing, they could do it for childcare centres too. Provinces could look at licensing requirements and the speed of approvals. And perhaps the lowest hanging fruit, governments could look at the credentialization of childcare labour—labour shortages being the biggest driver of supply shortages—and ask themselves why Early Childhood Educator, a designation that didn’t even exist in Ontario until 2007, is the pinnacle of quality care. No parent I know is an ECE, no grandparent, no loving neighbour, not even my own children’s caregiver (Marry Poppins in the flesh).

More immigrants are coming to Canada than ever before. No doubt many of them are well-equipped to care for children. If provinces want funding for childcare when their agreements are up, they should move heaven and earth to identify appropriate labour, rapidly upskill where needed, and help childcare centres solve labour shortage issues.

Canadian housing policy is going through a supply-side revolution, and childcare policy can too. As Canadians realize that the production of everything they want and need more of—from food, energy, and housing to services like health care and childcare—has been artificially constrained, they’ll start to demand action to reduce those constraints.

The first step to solving this problem is to find a brave political hero willing to take the issue on—or a few. We need public figures who understand the dynamics at play to start to make the case for change, turning public anger at long waitlists into demand for better solutions. We’ve done it before, we can do it again, and if we do, maybe young families can finally buy their dream home, find care for their kids, and get the happy ending they hope for.

Eric Lombardi: How elites and established interests hijack government to crush Canada’s middle class 

Commentary

New homes under construction are selling out in a housing development in Newmarket, Ont., Feb. 20, 2024. Nathan Denette/The Canadian Press.

Today in Canada, the promise of shared prosperity and equitable growth is fading amidst escalating challenges. Our country is grappling with the fallout from a record surge in temporary immigration, pushed through without debate at the behest of influential business interests without adequate planning for infrastructure, housing, or social capacity. Construction costs and timelines for these social goods, from housing to transit to hospitals, have ballooned to comical levels.

Meanwhile, petty crime is rising as community trust erodes, homelessness is multiplying, and the cost of living has skyrocketed post-pandemic. Unemployment is inching up, especially among young adults who increasingly see the “Canadian Dream” as out of reach.

For Canada’s middle class, life has become an endless gauntlet. The economy is dominated by oligopolies that disregard innovation, quality, and value. The government seems intent on increasing taxes while their ability to actually deliver public goods declines toward developing-world standards.

Amid this backdrop, the powers that be have lost touch with the systems and opportunities that once buoyed the middle class. How did we reach this precarious cliff edge? Why do cries for systemic improvements feel like screaming into the void?

Regulatory capture has rigged our economy 

Peeling back the layers reveals the pervasive influence of regulatory capture—a phenomenon that not only explains the erosion of public goods but also exposes why the Canadian economy feels rigged against its citizens.

Powerful corporations dominate major sectors, leaving small businesses and new competitors struggling to launch and survive. Simultaneously, wealthy and often older residents influence housing and growth policies to their advantage, marginalizing younger, newer, and less privileged Canadians. This entrenched system ensures that prosperity remains out of reach for those without established influence or wealth.