Post Election Playbook on Affordable Housing
The election is behind us and we are all suffering from a slight case of Deja Vu. The Liberals have formed another minority government. Regardless of which party you support, they all agreed that the most important election issue was “affordable housing“.
Although all parties’ agree in principle – none of their proposals will move the needle on affordability. Both Liberals and Conservatives have promised to ban foreign buyers for 2 years. While the NDP proposed to hit non-residents with a 20% tax on home purchases. The finger pointing wasn’t just on foreign investors – some local residents were also called out. The act of buying and selling real estate has been going on for ages. Once called capitalism has now taken on a more negative label: “speculator”. Why is it frowned upon now? We seem to love TV shows like “Love it or List it” or “Flip or Flop” etc.
It’s typical for political leaders to blame a segment of society and not take ownership of the situation. I agree that foreign buyers and local speculators have some influence on the costs of housing, but it’s a drop in the ocean compared to what the government has been doing for years. In short, there are many more moving parts to our economy than foreign investors and speculators.
What Politicians Don’t want you to know
One of the most important topics, that is rarely discussed is inflation. It’s the invisible tax that nobody wants to talk about. Unfortunately, Inflation has a direct impact on the affordability crisis as well as the inequality that it creates. It taxes the working class while making the rich wealthier. It squeezes the middle class – pushing them down the totem pole – widening the gap of inequality.
Governments however, love inflation because it’s the tax that is not debated nor legislated. Inflation is the side effect of quantitative easing (government act of “Money Printing”). Most people do not realize the magnitude of this problem and its effect. It is a fact, that there has been more money printed in the last 18 months than there was over the past 20 years. As governments create more money and inject it into the economy, asset prices go up in value, because there is more money chasing the asset. Therefore the wealthy, who already own assets, see their values skyrocket upward, while those that don’t own assets (home) get left further behind.
This has been an ongoing issue for quite some time. Yet, political leaders continually kick this proverbial can down the road, in hopes that it will fall on someone else’s watch. It’s a sad state of affairs and the only real solution is for Canadians to wake up and play with the cards that the government has dealt.
The first step towards dealing with the affordability crisis is to better understand how the monetary system works and how it impacts inflation. I have little hope that anything of substance will be done to solve the housing affordability crisis, especially in cities like Vancouver and Toronto. My suggestion is for millennials to make smarter decisions. Don’t hold your breath and wait for the government to solve the affordability issue for you.
Here is the first step.
Learn the Rules of the Game
Money and inflation are not taught in our school system. We must take it upon ourselves to become self-educated on things such as money, taxes and inflation. I share the following videos, to help kick start a better understanding of what inflation is and how it impacts its citizens. Although the second video may be explained by an elected official, I do not represent nor support any particular political leader or party. I simply use the example to better explain inflation as a hidden tax and its impact on society.
There are many great books on the subject such as:
- The Price of Tomorrow by Jeff Booth.
- The Ascent of Money by Niall Ferguson
Feel free to connect with me for more resources.