Making Major Decisions at Thunder Bay City Council-Part II

 

As noted in the previous post, the last few weeks at Thunder Bay City Council have been busy with three major decisions of particular note: not approving changes to council composition, approving the Kam River Heritage Park site as the location for a temporary village of tiny homes to address homelessness and finally, not shutting down the County Park location and adding Intercity Mall as the location for a new more centralized library.  These were particularly thorny issues to deal with on several fronts and my take is that the correct decision was made in two out of the three cases.  In the last post, I provided my thoughts on the two decisions I think City council got right: sticking with the status quo on council composition and not putting a large new central library in the Intercity Mall.  However, on the third decision – going ahead with the Kam River site for the tiny homes project- I beg to differ.  However, there may yet be a silver lining to the decision made if it is truly a transitional decision and time it buys used to bring about long term social and geared to income housing.

After several other tries at establishing a tiny homes village first on Miles Street (which is separate from another project by Alpha Court), then in Intercity, and then on Cumberland Street, the nod has now been given to the Kam River Heritage site – for now.  This has been somewhat of a merry go round in terms of location selection. There is still another meeting for final ratification, however, and this location decision has been made and reversed before. However, my feeling is given the cycling across locations, City Council will stick with this final choice if only to avoid further eroding their credibility. 

This has been a charged and emotional issue given the need to address the homeless problem and the presence of tent encampments under third world conditions.   There are also the many concerns as what the impacts of such a village will be on adjacent residences and businesses.  And to be fair, this is not just Thunder Bay’s problem, but the provincial and federal government’s problem given there are homeless encampments across the province and the country.

In the end, several reasons were advanced as to why the Kam River site should be selected including proximity to essential services, the fact the area already houses an encampment, and that it is in keeping with the City’s strategic plan.  After numerous delays, there is also a sense of urgency to put the project in place to not jeopardize provincial funding though making decisions to just get the money is never sound public policy.

However, a key concern raised has been safety of the residents given the proximity to water and rail tracks with the prospect of drownings up front and center.   The City Manager commented that “You can drown in six inches of water like you can drown in 12 feet of water. The depth is not really the consequential issue. It's clearly delineating it, making people understand the risks, and putting in some prevention measures."  This somewhat less than sensitive response in the wake of recent history along our waterways also omits the reality that a drowning is a drowning whether in six inches or 12 feet of water and if it is a municipally run village on city land there will inevitably be additional liability issues.  Safety is a big issue with this site.

As well, even with these tiny homes, encampments will still not be eliminated as the tiny home village is part of a city homelessness plan that includes three approved encampment sites. Also not addressed as a concern is the reality that this plan  - unlike the other sites considered - puts the tiny village essentially out of sight and out of mind by locating it where it will not be easily seen.  This will be a problem given that the project is supposed to run for only five years as “permanent” solutions are brought into play.  However, if the problem disappears from public view, it will be difficult down the road to generate the attention and the resources for permanent solutions.  The risk of hiding the problem is that long term solutions will go onto the back burner.

Then there is the cost.  According to the media reports, Thunder Bay will spend $5.5 million to construct an 80-unit "tiny home" village, with the province contributing $2.8 million of that, and has targeted operating costs for the first year at $1.5 million. So, over the five-year span of the project, the total cost for 80 units based on these numbers will be close to 13 million dollars.  Given the history of public sector capital projects at the public sector level in Thunder Bay, one can certainly expect cost overruns in the building and operation of these tiny homes.  Hamilton (always my favourite example) has also erected a “temporary” village to house its growing homeless population with the cost for 40 units (80 beds) originally forecast at $2.8 million but that has ballooned to $7.9 million or about $100,000 per bed.  Operating costs annually are apparently going to be $40,000 per bed. 

Is this a problem?  Well, in the case of Thunder Bay, think about it this way. Spending $13 million for 80 tiny units over five years works out to $162,500 per unit – or $32,500 annually. Thunder Bay is currently undergoing an apartment building spree financed by federal and provincial housing money which is increasing the supply of rental units but not necessarily increasing the stock of affordable housing because two-bedroom units in these new build apartments are going for as much as $2500 per month. At $2,500 per month, the annual rent is $30,000 per year.  Essentially, for the same amount of money, the City of Thunder Bay could simply house up to 160 homeless people in new existing two bedroom apartments for the next five years in very nice lodgings.  If older buildings at somewhat lower rents were put into the mix, then you could house even more homeless people.

Of course, this modest proposal of a solution is not going to happen. One suspects that current rental accommodation landlords in Thunder Bay are not terribly interested in helping solve the city’s homeless population problem in a manner that might affect the value of their investments or the building environment of their current mix of tenants.  This does however lead to what I think the longer-term solution could be. 

Given the private sector does not appear to be either capable or willing to provide new build affordable housing and given the amount of money that is being spent simply for tiny homes, there can be a public sector role in longer term housing solutions.  There needs to be more social housing – administered by the district of Thunder Bay Social Services Administration Board (DSSAB) and funded by the City of Thunder Bay, the Provincial and the Federal governments with local groups (such as Alpha Court as well as Indigenous organizations) in partnership.  The partnership approach is key and has been noted by others.  Small apartment style buildings providing social housing and geared to income units need to be built in multiple locations throughout the city with city owned and other public land in the downtown cores and city being possible locations.

Again, as outlined in a much earlier blog post, a good model here is Finland which has through the building of social housing complexes that provide places to live and a fixed address for those requiring access to government services dramatically rescued its homeless population. As I have noted, “People who are homeless need to be housed and housed without questions being asked.  Creating a complex or dispersed network of complexes of transitional emergency housing with very small personal units combined with social support such as a community kitchen, social workers and even a nurse practitioner and mental health workers and basic security on site would be one way of dealing with the homelessness crisis.”   And once lives are stabilized in these homes, the next step is placing them in geared to income units.  As far as I am concerned, tiny homes on a riverbank are at best an expensive band-aid solution.  If you are going to be spending tens of millions of dollars, you need to be leveraging that money into permanent solutions, not stop gaps.  True, the social housing approach is seen as more expensive, but it is more likely to solve the problem rather than dilute or obscure it.  Moreover, the tiny homes approach is not exactly cheap either.

Still, these are all complicated questions, and one certainly does not envy the people who must wrestle with them. I suppose getting two out of three decisions right is not a bad score but as my old high school motto would say - Agimus Meliora – let us strive for better things. And doing better in the case of homeless encampments given that the Kam River site is likely a done deal, is to gain redemption by using the next five years to fully implement long term solutions and not hide problems along a riverbank.

 

Making Major Decisions at Thunder Bay City Council-Part I

 

It has been a busy few weeks at Thunder Bay City Council with three major decisions of particular note: not approving changes to council composition, approving the Kam River Heritage Park site as the location for a temporary village of tiny homes to address homelessness and finally, not approving Intercity Mall as the location for a new more centralized library and shutting down the County Park location.  These were particularly thorny issues to deal with on several fronts and my take is that the correct decision was made in two out of the three cases.

First, let us start with council composition.  I have already opined on the shape of councils to come and the long and short is that City Council made the right decision in sticking with the status quo. My reasoning is not that City council might not benefit from a different model but replacing a seven ward and five at large plus mayor model with the proposed four wards with two ward councillors each plus two at large and one mayor did not represent a major improvement to either representation or decision making on municipal issues.  Cost savings from moving to fewer councillors was always a red herring because the few thousand dollars in savings from going to 11 members from 13 was minor and cosmetic given a  combined total capital and operating budget well over half a billion dollars.

The representation issue is more serious in that the proposed model would have essentially subsumed rural interests in Neebing and McIntyre wards and local neighborhood issues would have been lost in the new wards each with a mish mash of rural, urban, industrial and commercial interests.  Having two ward councillors in each of these wards seemed to be an attempt to have council composition resemble a more at-large system without having a fully at large system.  A “Larson” compromise it was not because the rejected model created more problems than it solved.

A fully at large system would in many respects be the least favourable outcome given the reduction in accountability to ratepayers who would no longer have a dedicated ward councillor.  That is a major problem with any fully at large system given that residential ratepayers foot 70 percent of the operating budget tax bill.  The partial at-large system being proposed created a more complicated set of representation problems for ward councillors while at the same time confusing who was responsible for the ward by providing two councillors who each could behave as an at-large ward councillor if they wished to avoid more pedestrian local issues.  And in terms of the desire for change and “cost savings”, informal surveys suggested an eight member council plus Mayor  was desired by the public rather than what was advanced even though again the cost savings here would be relatively minor.

As noted in my previous post, the public desire rightly or wrongly favored a smaller council of eight plus a mayor and “Going down to eight councillors plus a mayor would likely save several hundred thousand dollars – again a small sum compared to a budget in the hundreds of millions – but enough to increase resources available to perhaps attract better candidates. This does not necessarily mean raising salaries for councillors but could even involve providing funds so that they can hire some independent research support so they can better inform themselves on issues.”  This option but as an eight-ward and not all at large model plus a mayor would have been my preferred option.  However, this model was never on the table and after the time spent of this process, council composition is off the table for many years to come.

Second, the nixing of the Intercity library location.  The current CEO of the Thunder Bay Public Library is rather energetic and persistent as  this was the second attempt to foster change and bring about a central library at Intercity Mall.  However, as can be the case with leaders who believe they see things that others do not, you cannot take people where they do not want to go.  Moreover, closing a neighborhood library (County Park which is indeed in a neighborhood shopping mall) to provide a more centralized location in the Intercity shopping area where no one really lives – is not necessarily a service enhancement.  While it may on the surface appear to be a more accessible and convenient location, for families with kids, heading to the library becomes more of a destination event rather than part of a routine.  Moreover, the focus on having a large, centralized facility is at odds with the dispersed nature of Thunder Bay.  It might work but it is an expensive experiment and the cost of the project – even with contributions from the mall owners – were substantial and not likely to be fully recouped on the operating side from closing the County Park branch.

But there is more.  The informal sentiment in Thunder Bay – and not mine - is that books are very 20^th century and that indeed you might want to look at having fewer libraries rather than more.  I see that sentiment as a more North American affectation given that if you go to Europe, bookstores and libraries with hard copy books still proliferate (try visiting Dublin).  It is possible that in years to come, books will indeed enjoy a renaissance as the inevitable reaction against e-books and technology and a desire for retro sets in.  If future libraries with books and electronic media that function as information and communication centers (rather than community hubs) eventually have a renaissance, the case can oddly enough be made that Thunder Bay is “under libraried”.  That is, Thunder Bay could probably use a system with more small and dispersed libraries but not necessarily a system that concentrates resources at a few locations.

For example, the Hamilton, Ontario CMA with a population of about 785,000 people in 2021, has a City of Hamilton library system consisting of one central library in its downtown, 22 branch libraries of varying sizes, and a book mobile.  However, the CMA also includes Grimsby (one library) and Burlington (seven libraries) Put another way, 32 library locations for a population of nearly 800,000 people.  The Thunder Bay CMA with a population in 2021 of 123,000 has four libraries.  Based on the population and total number of municipal public libraries in the Hamilton CMA of 785,000 to 32, Thunder Bay’s 123,000 CMA population should have 5 municipal public libraries rather than 4.

At first glance this seems to support the case for a library at the Intercity area given that there are already four branches in existence.  However, I would argue that there is a better case for six smaller libraries - none of which would be in Intercity.  Thunder Bay’s current library system is rooted in a population distribution that comes from its history as two cities.  So, there are two large central libraries and two smaller neighborhood libraries.  The downtown Brodie and Waverly locations in a sense are too large given that over 75 years population has moved away from the core areas.

What might work better is six libraries each about the size of a County Park or Mary JL Black.  So, what this might suggest is a downsizing and refurbishment of the two downtown branches – Brodie and Waverly – in terms of their collections with each having a collection about the size of a MJLB/County Park.  Furthermore, one would house the archives/reference section and the other library admin and storage (which is not far from current reality).  Two new smaller branches would be put in place – one somewhere in the Northwood area or perhaps Parkdale and the other in the Current River area.  Essentially a system with smaller branch libraries providing more neighborhood access.  Can this work? Maybe? Will it happen? Not likely.  Capital costs are capital costs whether for small, dispersed facilities or larger centralized ones.  One cannot discern any appetite for major new capital library projects in Thunder Bay given the focus is on recreation facilities. 

Next post - Conclusion.

 

 

 

Housing Starts: Sudbury and Thunder Bay

Housing availability and affordability remain amongst the most pressing issues in current public policy and the north's major urban centers are no exception given the rise in the average price of housing as well as rents.  In response to provincial and federal incentives, both Greater Sudbury and Thunder Bay have seen a ramping up of housing activity.  By late  2024, Thunder Bay had issued 310 building permits and 241 shovel ready housing starts were in progress and as a result had exceeded the housing targets set for 2024.  Greater Sudbury has also seen an increase in housing activity with 2023 the strongest year in a five year period and by late 2024 had seen 610 housing starts of which nearly two thirds were rental units.

For both communities, 2024 marks a departure from recent performance given that Statistics Canada data suggests that for 2023, total housing starts were 263 in Greater Sudbury and 193 in Thunder Bay.  However, as impressive as the current ramping up may be, a glance at historical performance suggests that there is still a ways to go if current construction efforts are able to match those of yesteryear.  Figure 1 plots annual total housing starts from Statistics Canada (Series v42127460 andv42127445)  for Greater Sudbury and Thunder Bay from 1972 to 2023 and for both communities recent housing start total are nowhere near the peaks achieved in either the 1970s or 1980s.  Over the 1972 to 2023 period, Thunder Bay's peak was 1,620 housing starts in 1977 while Sudbury's best year was 1991 when it saw 1,758 housing starts.  

 

 

The period since 2000 is particularly flat for Thunder Bay with the best year being 2012 which saw 380 housing starts while Greater Sudbury peaked in 2011 at 595 starts.  And while the 1980s and 1990s were marked by stagnant population growth rates, the period since 2000 has seen some population growth (See Figure 2, Data source: Statistics Canada).  Between 2001 and 2023, Greater Sudbury grew  from 165,532 people to 185,230 - an increase of nearly 12 percent.  Thunder Bay has not done as well on the population growth front but nevertheless still grew by 3 percent of the last period.  A larger population but lower housing starts relative to the past means that population adjusted housing starts remain lackluster relative to even the recent past since 2000.  In 2012, for example, Thunder Bay managed 300 starts per 100,000 population while in 2011, Greater Sudbury was at just over 350 starts per 100,000.  By comparison, 2023 saw both communities at just under 150 starts per 100,000 population.  While 2024 was better even on a population adjusted basis, it remains that neither community appears able to construct at rates approaching those of the 1970s and 1980s.  

 

 

 

This is of course not just a northern Ontario affliction.  In Canada as a whole but Ontario in particular, the last 50 years have seen an increase in assorted regulations and requirements that make rapid project approvals and construction harder to do.  And, new homes built today - with the exception of apartment and condo units - at least anecdotally, often seem to be larger than they were in the past which all things given could also take more time.  Combined with higher land prices, it is understandable that construction today is likely not to approach the rates of the 1970s.   Then there is the fact that populations were much younger in the 1970s and 1980s meaning that labour was more abundant compared to shortages today especially in areas like skilled trades.   The result is a definite slowdown in our ability to meet both demand and need.

Thunder Bay House Prices in the Lead

 Teranet and the National Bank of Canada have released their latest Composite Price Index covering the April 2024 to May 2024 period covering the country's 11 largest CMAs and the index rose "by 0.5% from April to May, after remaining stable the previous month. In May, seven of the 11 CMAs included in the index recorded growth: Halifax (+1.5%), Hamilton (+1.1%), Calgary (+1.0%), Vancouver (+1.0%), Victoria (+0.8%), Toronto (+0.5%) and Quebec City (+0.4%). Conversely, decreases were recorded in Edmonton (-0.7%), Winnipeg (-0.6%) and Ottawa-Gatineau (-0.2%), while prices remained stable in Montreal during the month. On the other hand, increases were observed in fifteen of the 20 CMAs not included in the composite index for which data are available in May. The strongest monthly gains were seen in Saint John (+8.8%) and Lethbridge (+2.1%). Conversely, the biggest declines were in Guelph (-3.0% after a 5.8% rise the previous month) and Sudbury (-2.9%)."

The interesting result here is for Thunder Bay.  Monthly prices between April and May 2024 rose by 2.5 percent but what is more remarkable is the year over year increase for Thunder Bay which puts it at the highest amongst the 14 Ontario CMAs in the Teranet data.   As the accompanying figure shows, Thunder Bay registered a May 2023 to May 2024 increase of 10.42 percent, followed by Brantford at 8.99 percent and then Windsor at 7.82 percent.  Near the bottom are St. Catharines-Niagara, London and Guelph at 1.6 to 0.9 percent annual increases.  The strong showing in Thunder Bay is a function of a number of factors including recent growth in population.  However, population has been growing across Ontario so one wonders if part of the increase is also a function of the fact that Thunder Bay house prices are amongst the most affordable not only in Ontario but Canada as a whole attracting buyers from away.

 

 

All in all, good news for current owners of property in Thunder Bay.  Perhaps a bit more problematic for those in Thunder Bay who wish to get into the market.

What New “Affordable” Housing Looks Like in Thunder Bay

 As the federal government ramps up the billions to address the housing crisis in Canada including $6 billion to construct housing infrastructure. $1.5 billion to protect existing apartment buildings and a $15 billion apartment loan program, one would expect to see progress on the affordable housing front.  In the end, the issue is not really a shortage of housing to either buy or rent but affordable housing.  A glance at assorted real estate site in any city shows a large number of listings either for sale or for rent.  However, when one looks at the price, it is the cost of renting or buying that stands out, not a dearth of listings.

An illustration can be made for Thunder Bay which is seeing a large number of new rental building under construction.  A glance at Rent Panda reveals that some recent building projects are renting for some pretty hefty prices.  Take for example the two north side rentals in Thunder Bay shown below  – 80 Junot which is essentially adjacent to the Picton Street area and across from an EMS station – and 312 Crossbow – which is in a prime north side neighbourhood.  Location aside, both of these new build rental units are two bedrooms and two baths and rent for $2450 and $2400 a month respectively – utilities not included.  Two people earning minimum wage together could expect to earn at best close to $60,000 a year.  The rent alone will take up nearly half of their gross income, never mind the utilities.

Perhaps, south side rents are less?  Well the accompanying slide shows that a new build two bedroom one bath on Mary Street near Neebing Avenue is going for $2,300 a month though it includes water as a utility but likely not hydro.  I guess we could argue that these are all new builds and maybe we should settle for something older.  Well, a three bedroom one bath house on East Christina Street on the south side is renting for $2400 a month.  

The point here is that there is housing available for rent and some of it is new and quite nice but at $2300 and upwards a month and often excluding utilities, it is not affordable housing given the average incomes in Thunder Bay.  Median household income in Thunder Bay is just shy of $80,000 a year which means that half of households earn less than this.  At these rental prices, these below median income households will see close to half of their household income go to rent and utilities.  This is not affordable housing.  This is not geared to income or social housing.  This is where the shortage lies not only in Thunder Bay but across the country.

Will Thunder Bay Meet Its Housing Targets?

 

The Mayor’s State of the City Address last evening highlighted  housing construction in Thunder Bay particularly touting that Thunder Bay within Ontario had met its target so far and ranking tenth amongst Ontario centers (See here for a ranking).  The Mayor reiterated once again that in response to coming economic development and demand, Thunder Bay needed more housing and has a target of 1,691 new homes over three years.  Naturally, the question that arises is whether or not Thunder Bay can indeed meet this target. Much depends on the ability of the local construction sector to actually build that many homes in three years as well as whether the demand will materialize.

 

Forecasting the future these days is a pretty perilous exercise but some insight on the ability of Thunder Bay to build what amounts to nearly 600 new homes a year can be garnered from past performance.  Figure 1 plots monthly Statistics Canada total residential permit data by dollar value and number of permits from 2011 to 2023.  The numbers fluctuate seasonally though there is a spike in 2023.  However,  there are similar spikes in earlier periods.  If you want to smooth things out by taking a average - Thunder Bay has averaged monthly over the 2011 to 2023 period approximately 25 residential permits with an average value of 6.5 million dollars.  Converted  annually, that 25 permits a month translates into 300 units - a bit short.

 

Perhaps rather than permits issued, a better indicator of Thunder Bay’s capacity and ability to build nearly 600 units annually is a longer-term total housing starts series.  Figure 2 plots this from January 1990 to January 2024 and includes a polynomial smooth to highlight trends.  The results suggest that Thunder Bay is indeed capable of building 600 units a year as we have done so in the past.  Indeed, the early 1990s resulting in over 1,000 new housing starts annually.  However, the major obstacle is likely to be not building capacity or ability but demand for new units.  As the smoothed series points point, we are on an uptick that can see about 400 new homes being built in the next year.  Reaching 600 is possible based on the recent past given the smoothed numbers going into the pandemic.  However, as noted, the result is going to be driven also by our economic growth.  Thunder Bay has been doing well economically over the last year but will require sustained performance at this level to generate the needed demand for housing.

 

 

 

 This post originally appeared on the Fraser Institute Blog, February 24th, 2024.

Ontario’s housing woes—a supply-side problem

Housing prices in Ontario, like in much of the rest of Canada, have soared because of several factors including supply constraints combined with rising demand fuelled by robust population growth. The most recent installment in this ongoing saga is the federal government’s move to cap international student visas to which Ontario has announced measures requiring universities and colleges to guarantee student housing—though how this is to be done is a good question.

These short term reactive regulatory actions at both the federal and provincial level will ultimately do little to solve the problem of scarce and expensive housing because they do not address the root of the problem—the supply side, particularly the high cost of building new homes, which results in meagre efforts to build new housing stock.

Aside from the recent labour shortages and run-up in construction costs in the pandemic’s wake, there are two additional facets to the supply and cost-side issues of housing in Canada in general and Ontario in particular.

First, there’s the role of government in driving up the cost of new housing through regulatory actions at the provincial and municipal level. Housing in early 21st century Ontario has been treated not as an investment but as a source of cash for governments, which always seem to need more money. According to a CMHC report, government charges on new housing development via warranty fees, municipal fees, development and permit fees easily add 20 per cent to the cost of building a new home. Indeed, the regulatory charges for a new home in a place such as Markham can easily add up to $180,000 with some of the higher costs imposed on higher density row homes and high rise units relative to single-detached homes. This is not an inconsequential amount given housing prices in Markham average about $1.3 million.

Second, housing supply has not kept up with population growth. This is not a new story—the addition of new per-person housing stock in Ontario peaked in the 1970s. The chart below plots total housing starts for Ontario from 1955 to 2023. While there have been cyclic highs and lows, the overall trend has been upwards. Even so, the total number of starts peaked in 1973 at 110,536 starts. By way of contrast, 2023 saw 89,297 new home starts. In 1973, Ontario’s population was 8.1 million people whereas by 2023 it was estimated at 15.8 million.

When one calculates the number of new starts per person and constructs an index with 1955 equal to 100, it becomes clear that new housing starts per person have been on a long-term decline. Compared to 1955, we’re building 45 per cent fewer new homes per person. If you compare it to the per-person peak in the 1970s, Ontario in 2023 built nearly 60 per cent fewer new homes per person.

To add to the stock of affordable housing, the Ontario government has set the target of 1.5 million homes to be built by 2031. To this end, it created a Building Faster Fund that would provide up to $1.2 billion to municipalities that meet or exceed the government housing target set for that community and provide strong mayoral powers to municipalities to help cut through municipal red tape and speed up construction. The government has also set housing targets for municipalities to meet to receive the funding.

Keep in mind that to reach a target of 1.5 million new homes by 2031, Ontario would need to add 187,500 new homes a year until 2031. As the first chart illustrates, since 1955 there has not been a single year where Ontario has come close to that number. Indeed, if one compares housing starts as a per cent of the target set by the provincial government across municipalities based on data from its Housing Tracker (see chart below) it’s clear that as of late-January 2024, barely one-quarter of municipalities had met their 2023 housing target. Not the most auspicious start.

What’s Ontario to do? The province’s housing availability and affordability problem will likely get worse before it gets better. Along with boosting the supply of skilled trades people to help construct more homes, it must reduce the regulatory and zoning barriers that slow down the construction of multi-unit residential projects, reduce the governmental development charges particularly on “missing-middle” density builds that emphasize family-sized units, and provide further tax incentives geared to building high-rise multi-unit builds with family-sized units. Governments should also increase efforts to leverage surplus public lands at the federal, provincial and municipal levels to help construct affordable housing as the current approach has paid little attention to having a constant and ample supply of shovel-ready sites.

Only such a multi-pronged approach will have any hope of meeting the housing needs of Ontarians over time.

Solving the Homelessness and Housing Crisis

 

As rents soar in Canada and encampments spring up in cities across the country, it is evident that the country faces a housing crisis which to date seems intractable.  Even the recent slowdown in home prices does little to improve the situation given that average housing prices in Canada remain just shy of $700,000 with prices varying across the provinces. Average housing prices in Greater Vancouver are just shy of $1.2 million while Greater Toronto is slightly less at $1.1 million.  And while at an average of $322,000, Thunder Bay seems more affordable compared to Toronto and Vancouver all of these averages mask the variation in prices around the average that realistically means something half decent that you may actually like is always substantially above the average. 

 

However, the housing and homelessness crisis and what has been termed the housing shortage is not really just about the price of an average house.  There are a number of issues here.  First, there is actually not a “shortage” of houses and apartments per se as a glance at any real estate listing in cities shows that there are always houses for sale or apartments for rent.  However, the price or rents of those housing units are well above what individuals are either able or willing to pay especially given the recent rise in interest rates which has increased the cost of home ownership in particular. One could term this a crisis in affordable housing rather than a shortage of housing. Second, there is the issue of homelessness which has manifested itself with rising numbers of people in cities across the country living in tents and encampments.

 

Solving these issues requires a two-prong solution.  First, dealing with affordable housing.  The sudden drive to expand the supply of housing to make it affordable is certainly a potential long-run solution. However, in the end building more $1,000,000 homes in suburbs, which developers like to do because they can make a lot of money, really does not solve that problem. Moreover a $1,000,000 new build home program does not solve the housing affordability problem unless it is done so incompetently by the private sector that they create a glut that drives prices down which seems unlikely.  Developers across the country over the years have learned that you just do not build a couple of hundred homes in a subdivision and then sell them – you build on spec with a large deposit.  Basically, every new home built already has someone lined up for it.

 

The solution to the affordable housing is the building of either rent-geared-to-income housing or the building of standardized-government subsidized housing units (much like the Wartime Homes Program) whose design, construction and sale is also geared to income.  One example of this is the standardized house designs being put forth by the government of British Columbia which could serve as a template for other provinces. This will enable homes to be built more quickly but it could also serve as a model for lower cost housing designs. As for rent -geared-to-income, all new apartment builds should have portions of the building ranging from 10 to 20 percent of rent geared to low and middle incomes with government social housing subsidies providing the incentive to builders. This is preferable to simple erecting mega projects of low-income apartments in neighborhoods that essentially creates clusters of low-income individuals.

 

In a sense, the Ontario government’s current approach to increasing housing supply by providing incentives and powers to municipalities to simply expand housing stock does not follow either of the above approaches.  Take the case of Thunder Bay where the target is to build over 2000 homes by 2031 according to the provincial target but given that the target has been exceeded in 2023 it is now seeking to build (with federal funding of course) 2000 homes over the next three years.  The optics tout this as a success story and the start of a housing boom fueled by mining but the 167 units for 2023 (which exceed the target of 161) is largely driven by projects already planned or underway and 60 of the units (plus another 60 which have started) are apartments being marketed as “luxury” apartments.  It means the rents for the smallest units will easily be over $2000 a month.  This will not be ‘affordable” housing given the cost-of-living crisis that has gripped the nation and its media.  Moreover, the target going forward is ambitious given the past track record of housing starts in Thunder Bay to date which given the cities rate of population growth to date has been modest. 

 

The other housing crisis – homelessness. -will not be solved by new suburban housing developments, neighborhood infill, or luxury apartments.    It is an entirely different problem all together.  The solution here is best modeled on what has been done in Finland where a non-governmental organization (NGO) called No Fixed Abode founded in 1986 reduced the number of homeless in Finland from 20,000 to about 3500 at present. Note that Finland’s population is 5.5 million and there are currently 3500 homeless people estimated.  In Canada, just Hamilton Ontario with a population of 579,000 has an estimated 1,500 homeless.  As well, since 2008 Finland has also embraced another program called Housing First which creates flats in social housing complexes that along with serving as places to live also provide a fixed address for those requiring access to government services and supports.

 

Now, Finland is not Canada and simply grafting another country’s solution to solve your problem can generate all kinds of problems. However, there is something here that needs to be explored.  Some of all the money that is going to be thrown at simply increasing housing stock irrespective of whether or not people can afford it needs to be directed to what I would term Transitional Emergency Housing.  People living on minimum wage or are evicted from apartments and have no place to live need some place to get back on their feet.  Boarding houses with rooms to let used to be a place where people of limited means often ended up til they got back on their feet, but no such places really exist anymore. People who are homeless need to be housed and housed without questions being asked.  Creating a complex or dispersed network of complexes of transitional emergency housing with very small personal units combined with social support such as a community kitchen, social workers and even a nurse practitioner and mental health workers and basic security on site would be one way of dealing with the homelessness crisis. 

 

 

 

Where to locate such complexes?  They need to be built on a scale that reflects their local neighborhood and are close to where many homeless choose to locate because of amenities – often downtown cores.  Most municipalities own land in their downtown cores that could be used for such a purpose. They will not be cheap to operate but realistically what else is the solution?  Simply leaving the problem to grow does not solve the problem.  Throwing money on market rent apartments and suburban subdivisions does not solve homelessness, never mind, really create affordable housing. Using resources in a wise and targeted way is the solution to both housing affordability as well as homelessness. True, perhaps these are the ravings of simple economist who does not fully grasp the complexity or enormity of the problem.  On the other hand, perhaps not.

House Prices Are Coming Down

 

The latest house price figures have been released by the Teranet-National Bank House Price Index for major Canadian metropolitan centres in Alberta, British Columbia, New Brunswick, Manitoba, Nova Scotia, Ontario, and Quebec. According to Teranet:

 

After adjusting for seasonal effects, the Teranet-National Bank Composite House Price Index™, which covers the country’s eleven largest CMAs, declined by 0.4% from September to October, the first decrease following five consecutive monthly increases. In October, four of the 11 CMAs included in the index experienced decreases: Toronto (-1.6%), Edmonton (-1.2%), Vancouver (-1.1%) and Ottawa-Gatineau (-1.1%). Conversely, notable increases were recorded in Montreal (+3.7%), Halifax (+1.1%) and Winnipeg (+1.0%). On the other hand, decreases were observed in 11 of the 20 CMAs not included in the composite index for which data are available in October. The biggest monthly decreases were seen in Saint John (-5.3%), Trois-Rivières (-3.3%) and London (-2.5%). Conversely, the biggest increases were in Moncton (+4.6% after a 2.3% drop the previous month), Kingston (+3.8%) and Peterborough (+2.6%).

The month over month figures for October show decline in most centres but the more interesting numbers are the declines from the peak price.  Peak price for most of these cities occurred in Spring of 2022 though Calgary and Saint John appear to have seen peaks in 2023. The accompanying figure shows that no one has seen a price increase since the peak though Sherebrooke, Quebec City, Moncton, Lethbridge, and Calgary appear to be perfectly flat since their peak.   

 

As for the remaining cities, the percent change since peak price range from -2.7 percent for Montreal to -18.6 percent for Brantford.  Thunder Bay is in the company of cities with relatively small declines coming in at -3.6 percent while Sudbury is a bit more coming in at -9 percent.  

Strong Mayors and Housing: Thunder Bay Edition

 

Thunder Bay City Council this week did not support Mayor Ken Boshcoff’s desire to acquire “strong mayor powers” in a quest to meet provincial targets for housing and reap the benefits of associated funding support.  In some respects, this is not a surprise, not so much because members of council are so concerned about local democracy but because it does represent an erosion of their power given that strong powers on offer allow mayors to pass bylaws with the support of just one third of council, as well as veto bylaws passed by council on matters involving provincial priorities. In addition, the mayor will be able to propose the city budget, reorganize city departments and hire or fire the city manager and even some department heads. If anything, this represents a major potential increase in workload for the Office of the Mayor and one suspects there will eventually be some hiring to provide the necessary support.

 

Thunder Bay City Council because of its unique structure of at-large and ward councillors has always had councillors whose electoral mandate pretty much matched that of the mayor given they were elected by city-wide voters.  What the new changes mean in Thunder Bay and indeed in municipalities across the province is that the power structure has been unilaterally changed by the province in an effort to get the provincial housing agenda kick-started.  Indeed, going down the road, what some future mayor might do with such powers is a real concern. Nevertheless, it would appear that the mayor is going to ask for those powers with or without council support because the mayor wants to commit Thunder Bay to a target set by the province of 2,200 new homes by 2031.

 

This target is an interesting one because it means that over the next eight years (2024 to 2031), Thunder Bay needs to build an average of 275 new housing units annually.  The accompanying figure plots the annual number of housing starts from 1972 to 2023 and also plots the annual target set at an average of 275 units per year.  The 2023 estimate is incomplete given that the numbers from Statistics Canada only go to August and the monthly average based on January to August is used to fill in the rest of the year.  Even that total seems an underestimate given the couple of large apartment projects that have emerged that might double the total for 2023.  

 

 

 

Needless to say, the target is an ambitious one given that since 2000, the annual average works out to about 105 units per year.  In other words, going forward, it will be expected that Thunder Bay has to achieve just over 2.5 times the number of starts than it has managed on average over the last two decades. 

 

Can a strong mayor somehow wield the influence and power to more than double the number of housing starts in Thunder Bay?  Given the shortage of building trade workers as well as the fact that for the houses to be built, there has to be a demand for the housing and interest rates have spiked at the moment, it will be a challenge.  Then there is the ability of developers to earn a profit on the new builds whether single detached houses, apartments, or condos, even with whatever financial support the province has in mind.  Again, one suspects this target may be a tough one to reach.  A lot depends on whether or not there really are a lot more people in Thunder Bay than official counts say there are and if those people are actually interested in permanent housing in Thunder Bay and more importantly have the ability to pay for it either as owners or renters.

 

One suspects that in the end, the real influence of strong mayor powers in Thunder Bay will not be so much on the future housing stock but on things like the city budget and even senior staffing.  The mayor’s position is about to get more important and as the adage goes, with great power comes great responsibility.

It Really is About Housing Supply and Canada Needs to Get Building

 

The housing shortage, rising prices and rising rents continue to preoccupy Canadian public policy debates and with good reason.  As of June 2023, median rent for a one bedroom apartment in Vancouver stood at $2,700 and $2,400 in Toronto with rent across Canada up 20 percent over pre-pandemic levels.  Meanwhile, average housing prices in Canada reached $729,044 in May of 2023 – the highest they have been since April of 2022.  Since 2000, residential property prices in Canada have essentially doubled – per capita income have not.  

 

Needless to say, the response in the most Serene Kingdom of Canada has been predictable.  In the name of boosting supply, municipalities starting to chase multiple property owners for tax revenues  (who incidentally are probably renting out the properties they own and helping to alleviate the shortage). Then there is the typical passive-aggressive Canadian story about how seniors are not downsizing and are living in homes with empty bedroom but of course “Policy experts and large city mayors are not suggesting that seniors should rent out their rooms en masse to better use the extra space.”

 

There is indeed a supply issue in Canadian housing, but it is not because there are too many multiple owners who are hoarding empty apartments or existing homeowners who do not want to share their spare rooms.  It is because over the long term the supply of new residential construction has fallen behind the rate of population growth so that housing starts per capita are dramatically lower than they were during the 1970s and 1980s.  Incidentally, this era had even higher interest rates and inflation than today and still managed to keep up with construction.  The accompanying figure plots seasonally quarterly total Canadian residential housing starts (units) as well as the per capita index (with 1961=100) [Data Source: Statistics Canada] for the period 1961Q1 to 2023Q1.  The results are quite startling. 

 

 

 

In the first quarter of 1961, total housing starts in Canada were 34,225 units.  In the first quarter of 2023, they were 55,753 – an increase of 63 percent.  The problem is that in 1961Q1 Canada’s population was 18.1 million while in 2023Q1 it was 39.9 million – an increase of 120 percent.  As a result, when the number of starts per capita are converted into an index (with 1961=100) it becomes quite apparent that despite surging population, we are building fewer new units per person despite a slight upward trend in the total number of units. 

 

The most quarterly housing starts ever were actually  in first quarter 2021 at 73,738 with the average quarterly number of starts in 2021 at 68,612.  In 1973, the average number of quarterly housing starts was 66,883.  Total starts at present are not much different than the peak of the early to mid 1970s.  When you look at the per capita index, the overall trend since 1961 is downward but essentially it appears that after the housing bust of the late 1980s, housing starts per capita have stayed flat at about half of what they were in the 1970s.

 

The baby boom and tail of the boom that entered the workforce in the 1969s to early 1980s was a population surge that was accompanied by new and rising per capita housing construction.  The current surge in population is not being accompanied by rising per capita construction but with construction at the historical per capita rates in place since the 1990s.   That is why housing prices are high. Band-aid solutions that attempt to solve the problems by essentially redistributing existing supply is but another sign of a society that seems to find it increasingly hard to build new things and to get things done.  But then, this is the same society that is dealing with inflation by injecting more money into the demand side of the economy. In the end, government policy to fight inflation is still conflicted with higher interest rates to slow down the economy on one hand and stimulus on the other.  It would be more useful if some of that stimulus went to building housing.

Dealing with Homelessness

 

Among the growing problems of affordability in cities across Canada including Thunder Bay, is the specific issue of homelessness.  The latest point-in-time survey by the District of the Thunder Bay Social Services Administration Board that was published in January of 2022 of 221 participants documented that 43 percent used emergency shelters.  Indeed, the Board estimates that there are closer to 700 people experiencing homelessness in the 103,000-square-kilometre district of about 146,000 people and about 70 percent of them identify as Indigenous.  Finding solutions to this complicated set of issues is an on-going process and into it has stepped the City of Thunder Bay.

 

Thunder Bay City Council has decided to move ahead on a recommendation to establish a $1 million fund to support local capital projects addressing poverty and homelessness in Thunder Bay.  The fund is not intended as a stand-alone source of financing and is expected to leverage additional support from the federal and provincial government as well as other funders that could include private sector sources, philanthropic organizations as well as First Nations organizations.  The projects are designed to be in the area of transitional or affordable housing and grant applications will be reviewed by a committee of senior city staff.   The idea, initially proposed by Councillor Bentz, is innovative and perhaps one of the first in Canada and comes in the wake of the 2022 federal budget which has committed more funds for homelessness as well as a commitment to the redesign of federal housing strategies.

 

This program represents a start to fixing problems in a community that has received its share of bad press in the national media lately when it comes top homelessness, poverty and racism.  City council approved the recommendation though there was one dissenting vote from Mayor Mauro.  Mayor Mauro argued that such a fund would replace federal dollars and that the City is going to pour resources into projects that would have occurred with federal funding anyway. The Mayor is technically correct that funding to end homelessness is likely going to flow in greater amounts from the federal government anyway.  Moreover, the housing crisis is a federal and provincial responsibility to solve even if its effects are felt largely at the local level.  However, that does not mean a municipality should sit back and wait for someone else to start solving the problem.

 

At the same time, providing the municipal resources represents a way to kick start some aspects of the process in a cooperative manner given that the funds are expected from federal and provincial governments as well as other partners.  In some respects, it represents an action in tune with basic principles of subsidiarity in fiscal federalism by signalling change from the grassroots.  Rather than replace federal dollars, the Community Partnership Fund Thunder Bay is creating may actually attract more funding and give the option to the other levels of government, as well as private agencies, First Nations Organizations and philanthropy groups of an opportunity to accompany their verbal pronouncements with more effective actions.  And besides, the political optics for Thunder Bay with this fund are positive even if the marginal impact is ultimately small.  Change requires first steps to be taken and that is what this is.

 

Thunder Bay City Council has done some boneheaded things in the past but this is not one of them.