Thank you very much. I'm pleased to have this opportunity to provide comments today.

My name is Rebekah Young. I'm vice-president and head of inclusion and resilience economics in Scotiabank Economics. I'll be providing perspectives from a macroeconomist perspective.

Also in my role, I provide thought leadership on sustainable economic growth by taking a longer-term look at structural forces impacting Canadian welfare. Clearly, housing is one of those issues.

Housing affordability in Canada has clearly been on a path of deterioration over the past few years, but the erosion of affordability has been going on for decades now. Market forces have been a big part of this story.

Picking up on some of what my colleagues said, household income has been a positive story. Household income for the average Canadian household has been outpacing inflation fairly consistently over the past few decades. This has increased their purchasing power.

While interest rates are currently high, they have been trending down structurally for decades, making it cheaper for Canadians to finance homes over time and, again, increasing their purchasing power.

Demographics are another obvious side of the demand equation. This includes both a growing population but also an aging population. What we see is that occupancy, or the number of individuals per household, has been declining over the past few decades. As a result, the demand for homes has, in fact, outstripped population growth over the past few decades.

I would just note on aging, because we are aging as a society in Canada, that it's important to acknowledge that many more Canadians want to age in place, and in some cases, alternatives like downsizing to a condo can, in fact, be more costly than staying in place, even if it means more bedrooms sitting empty.

Supply has no doubt been a major binding constraint against these demand-driven and demographic-driven forces. Again, looking past the last few years to the past few decades, there has been an erosion of the elasticity or the responsiveness of supply to housing demand. The reasons are numerous and well documented elsewhere, from regulatory to zoning issues to escalating development charges.

Labour is another one of the challenges. Despite record-high numbers of workers in the construction industry, the number of homes that we're building in Canada has not substantially changed on a trend basis. We see that CMHC has attributed this both to productivity declines in the sector as well as regulatory hurdles along the way in a very highly fragmented sector. However, the net effect is that it is taking longer, and it is more costly to build homes of all types in Canada today.

Returning to the bigger picture, all of these factors have been amplified over the past three years to push what's been a slow-burning affordability path to an acute one. There is no panacea to restoring affordability. We do think that priorities should be placed on supply, with a broad definition to include related housing infrastructure, and that care is needed when we look at demand-side measures given the risk of further exacerbating affordability. We should also be noting changing societal preferences and needs, and those should be taken into consideration.

Canada should be able to slow the acceleration of home prices over time, but this is going to take concerted and coordinated action across all levels of government and collaboration with private sector and social-purpose organizations. However, even if the home price appreciation is slowed or even decelerates modestly, there will be a subset of Canadians, namely lower, fixed-income Canadians, for whom appropriate shelter will still be unaffordable. Canada will likely need targeted solutions there.

I'll just elaborate very briefly on this point. We published a paper last year titled “Canadian Housing Affordability Hurts”, which has been raised by this committee a few times.

I underscore that a key finding was that first-best solutions still involve dismantling supply barriers and harnessing market forces to massively scale up housing across the market-based spectrum. However, that trickle-down effect will not reach—at least fast enough—a small subset of Canadians with little or no market income under most reasonable paths. Those gaps are wider than governments can reasonably alleviate through transfers alone on an ongoing basis. A do-nothing scenario is also not fiscally appropriate, as the knock-on effect on other social infrastructure from shelters to hospital beds to prisons is even more costly than the provision of subsidized or social housing.

I would reinforce, though, that the paper makes the case that it's not an either-or situation. It's not social housing or market housing, and it's not avoiding a polarization of public versus private provision. Rather, it's about the right mix that would serve all Canadians.

Just stepping back, I would point out through an economic lens that housing is part of a bigger system and there are trade-offs and opportunities to consider. The income investment and capital that go into housing are income investment and capital not going elsewhere. These do warrant full deliberation.

Just as a final point, I would also note that Canada is not unique and that, in terms of home prices to income as a ratio, Canada is about the middle of the pack relative to our OECD peers. More responsive supply is first-best, but we may need to consider more broadly how markets are structured to ensure suitable, adequate and affordable shelter for Canadians without stifling the economic growth drivers that ultimately secure welfare gains.

I'll stop there. Thank you.