Kamloops’ rental shortage is no accident

The shortage of affordable rental units in Kamloops is the result of deliberate government policy starting with the Mulroney Conservatives in the 1990s. Not just Kamloops but all Canada was affected.

CSI low-income housing in Kamloops

Governments stopped investment in affordable rental units for a number of reasons: strong wage growth from 1996 to 2006 coupled with declining interest rates and modest housing prices enticed more renters into home ownership.

But by the mid-2000s, stagnant wages and the growth of low paying jobs along with escalating housing prices pushed people into rentals.

Now the federal Liberals in cooperation with the B.C. government and CMHC have reversed that trend with an investment in affordable housing.

Our society, the Centre for Seniors Information in Kamloops, is one of the city’s non-profits involved in the construction of affordable housing (I am the president of the society). We are building a five story apartment with112 units, ranging from studio-sized, to two bedrooms on the site of the old Cineplex Odeon theatre on the corner of Sixth Avenue and Victoria Street.

Judging by the response that our housing manager is getting, the building could be full when it opens its doors in just over a year.

The drought in affordable housing has had a devastating effect on low and middle wage-earners.

Canada’s five most common occupations are low-paid and often not full-time. (admin assistants, retail salespersons, cashiers, food and kitchen helpers, food and beverage servers) representing 1.8 million workers or 12% of all jobs,

According to calculations done by David MacDonald, senior economist with the Canadian Centre for Policy Alternatives, wages don’t pay the rent any more. He has come up with a measure of how much wages are short, something he calls the “rental wage.”

He defines the rental wage as the amount you would have to earn so that no more than 30 per cent of your wages goes to rent. In Kamloops, the rental wage is $25 an hour for a two-bedroom apartment. That would leave a reasonable remainder of 70 per cent for groceries, medicine, clothing, fuel, etc.

Another way of measuring rent is by the number of hours you would have to work at a minimum wage of $12.65. In Kamloops, you would have to work 78 hours a week to pay for an affordable two-bedroom apartment.

I suspect that many Kamloopsians are doing without essentials because they pay more than 30 per cent of income for rent.

Between 1980 and 1993, 49% of all rentals built were affordable. Federal tax incentives and loan programs to private investors also played a pivotal role in apartment rental construction over that period.

Now, new federal programs plan to deliver more than 110,500 new units by 2027-28. Combined with other provincial and federal programs, 15,100 and new affordable units were committed in 2017-18 and 16,600 in 2018-19; almost as many as from 1970 and the early 1990s before the cuts.

Canadians desperately need affordable rentals. One-third of Canada’s 14 million households rent their homes.

Without deliberate government policy, private investors can’t deliver the housing needed.

Everybody wins. Mortgages are given specifically for low income rentals, developers build the units and employ trades people, people can afford rent with money left over, and non-profits like ours take ownership of the buildings to generate much needed revenue.

Tax loopholes –the good, bad and ugly

What’s the difference between a tax break and a tax loophole? Tax breaks are legitimate deductions that I make and loopholes are shady tax dodges that others use. Seriously, they’re all what economists call tax expenditures. The only difference between them is whether they progressive or regressive, and how much they improve equality.

Some tax expenditures benefit low and middle-income families such as deductions for union dues and post-secondary education. Others benefit wealthy Canadians such the mineral exploration deduction and the capital gains allowance.

Regardless, they are all uncollected taxes. And it’s a lot says David MacDonald, senior economist for the Canadian Centre for Policy Alternatives (Monitor, Jan/Feb, 2017). The government of Canada gives up almost as much in tax expenditures as it collects in taxes. In 2011, tax expenditures were $103 billion while collected taxes were $121 billion.

Tax expenditures serve a useful purpose if they improve equality. Equality is an indicator of how happy citizens are, be they rich or poor, as I argued in an earlier column (Conservatives can increase chances by decreasing happiness, Dec. 14, 2016).

The question is whether tax expenditures increase equality or reduce it. Are they progressive or regressive? MacDonald has analysed tax revenues and found that of 64 tax expenditures, only five are progressive and go to the lower half of income earners. The remaining 59 tax expenditures go to the top half. The tax benefit for low-income earners is a paltry $130 while for the richest it’s $15,000. Is it any wonder that “tax loopholes” seem shady? Low income earners see it for what it is –a benefit that only the rich receive.

With the feds in the fiscal hole, and with almost as many taxes uncollected as collected, I would have thought that Finance Minister Morneau would have use the last budget to reform taxes. But he didn’t according to Kevin Milligan, professor of economics at UBC.

“In the budget, the government did make some good moves with the tax measures it tackled, but it did not tackle enough. That is, Mr. Morneu may have grabbed some of the low-hanging fruit, but he left a lot of fruit further up the tree untouched, (Why Morneau got cold feet over eliminating Canada’s bloated tax-credit system, Globe and Mail, Mar. 24, 2016.)”

On the plus side, the feds are still committed to reviewing corporate tax shelters that allow income to be split with partners and lower taxes. And they simplified the Canada Caregiver Credit for those caring for an elderly or infirm family member.

It’s OK to eliminate tax breaks but not my tax break. Milligan elaborates:

“For every tax expenditure, there is a particular constituency that benefits, while costs are dispersed across all taxpayers. Firefighters like their volunteer-fighter tax credit; teachers like their teacher-school-supply credit and first-time home buyers like their home-buyer tax credit.”

The solution, adds Milligan, is to eliminate entire bundles of tax breaks. That way no particular group feels targeted by tax reform.

Tax reforms may be painful but they’re necessary to improve equality. We’ll all be happier for it.