There's a difference between housing and real estate. Housing is where we live; real estate is an investment. It's a pedantic but critical distinction. In all the breathless debates over housing bubbles and policy options, we look primarily at the investment.
Imagine for a moment those debates centred around an investment other than real estate. A mutual fund. Or gold. Or an Exchange Traded Fund.
Wouldn't there be a backlash against government intervention in those investments? Would any of the stern statements from politicians keen on cooling the market make any sense?
Ontario Premier Kathleen Wynne has unveiled a series of 16 steps she hopes will cool the red-hot housing market in Toronto. Forget for the time being that we simply don't have the data to tell us whether any of these policies will work. Others have written about the motivations and risks of unintended consequences.
Consider instead how all this would be regarded if it wasn't as emotional a subject as real estate. Or if governments were not focused so intently on the investment side of soaring house prices, but rather on the supply side by providing more affordable housing for its citizens.
"When young people can't afford their own apartment or can't imagine ever owning their own home, we know we have a problem," Wynne said.
Imagine if the premier had said: "When young people can't imagine buying gold, we know we have a problem."
Ontario Finance Minister Charles Sousa recently told a news conference that the government had become "increasingly concerned about rapidly rising rents and housing prices, and their impact on the many people looking to find a home." At the news conference, officials from three levels of governments, as well as assembled media types, nodded in apparent agreement.
It's hard to fathom a similar reaction if Sousa had said the government was increasingly concerned about rapidly rising prices of large cap stocks and their impact on the many people looking to invest.
The list goes on.
"I don't want people to lose hope with respect to home ownership," said Toronto Mayor John Tory, seemingly forgetting that home ownership is not a right — it's an investment like any other.
Echoed Prime Minister Justin Trudeau: "People need to afford the homes in the cities that they work."
The point here is that nearly all the oxygen in any discussion around housing focuses on that investment, and on one generation being priced out while the retirement plans of another generation are based almost exclusively on the soaring value of their homes.
That preoccupation also pays short shrift to the fact that the housing market has already shown some signs of cooling outside of southern Ontario and the Greater Vancouver Area.
Governments don't talk about intervening when certain stocks soar or the price of food rises. They certainly don't implement taxes or restrictions on certain buyers, including foreign investors, in an attempt to make an investment more affordable for a younger generation.
- Real estate 'chaos' sends millenials scrambling to buy
- Analysis: Relying on prices that always go up is foolish
There's also a bigger issue at play. If all the time and money spent talking about cooling the investment side focused more on the housing side, many of the issues we're struggling with today just might become more manageable.
More affordable rental housing is key
The ability to invest in the housing market may not be a right, but having a secure place to live and raise a family certainly should be. If we focused on that side of the equation, we'd spend less time focused on foreign buyers, speculators and the spectre of an ominous housing bubble that could burst at any moment.
Governments could review zoning ordinances and the permit process to ensure we build more purpose built rentals. They could consider building a stock of housing that meets the needs of the market, rather than the profits of the developers.
But it's hard to change decades of thinking.
Governments have been nurturing, protecting and underpinning the housing market in multiple ways for decades. Among the most notable supports are the mortgage insurance backing provided by CMHC and the fact that, on the sale of a principle residence, home owners are not obligated to pay capital gains taxes.
Economist Armine Yalnizian says politicians need to rethink the path to prosperity. Traditionally, she says, the two paths were higher education and/or home ownership.
"The former no longer guarantees even employability, let alone higher wages; the latter is increasingly out of reach in part because of the former," she says.
Risky to dismiss home ownership
But Yalnizian says breaking from that orthodoxy comes with risk.
"Politically it is hard for politicians to get off the 'ownership society' narrative track, because it looks like they're waving the white flag on the future of the middle class for younger voters," she says.
Still, Benjamin Tal, Deputy Chief Economist of CIBC World Markets, says other global cities and societies have a completely different way of thinking about housing. And he notes that politicians won't change until those who vote for them start thinking differently first.
"We have to develop that mentality that if you are 35 years old, you're married, you have two kids and you're renting, nothing is wrong with you."