Canada's 2016 Budget Will Have a Small Positive Effect on Housing Affordability

TORONTO, ON--(Marketwired - March 23, 2016) -  Canada's 2016 Budget -- released on 22 March 2016 -- has outlined the Government of Canada's commitment to a diverse set of measures that will have a positive effect on Canadian households' ability to afford shelter and other essentials. However, the effects are relatively small on average and do not noticeably affect the systemic issues driving affordability pressure across the country.

Affordability: What this means for households

CANCEA's 2015 report, Understanding Shelter Affordability Issues: Towards a Better Policy Framework in Ontario, introduced the Shelter Consumption Affordability Ratio (SCAR Index) to measure the ability of households to meet rising shelter expenses after paying for other essentials, such as food, transportation, taxes, and clothing. With the SCAR index showing affordability pressures at a 30 year high, Canadian households have to spend 38 cents of every dollar on average to pay for shelter after paying for other needs. However, this is just an average, with young families and other demographic subgroups facing even more pressure than the national average. Affordability is also geographically diverse, hitting much of Atlantic Canada disproportionately harder than the rest of the country largely because of lower (non-transfer) income.

The 2016 Budget introduced a few key measures that will affect affordability issues, including:

Investments in Affordable Housing

The Government's commitment to address a lack of affordable housing (either social or built-for-purpose rental) will directly impact affordability for many Canadian households. This will be beneficial to families which spend a disproportionate amount of shelter-related expenses on rent such as in British Columbia (particularly in Vancouver).

Infrastructure Investment

Infrastructure can affect affordability in numerous ways, including through the costs of transportation and changes to productivity (and thus wages). However, it is crucial that individual projects are undertaken at the right time and where they are most needed in order to realize the broader, systemic economic impacts arising from them. For example, previous analysis done by CANCEA on Ontario's infrastructure estimated that approximately 80% of the total benefits generated or supported by new infrastructure rely on the projects being not necessarily shovel-ready, but shovel-worthy. This is particularly true of transit projects in major urban centres, including Vancouver, Toronto, and Montreal.

On the whole, while the increased commitment to public infrastructure is certainly a step in the right direction, CANCEA research indicates that the Federal Government is still contributing too little relative to the amount of revenue that it generates long-term from infrastructure investment.

Targeted income measures

There are also a number of targeted income measures presented in the 2016 Budget. Specifically, the tax cut for middle income families will benefit families across Canada by lowering a major expense. Further, the introduction of the new Canada Child Benefit, which offers financial support to low- and middle-income families with children, notionally improves their ability to pay for child care. This will be of significant benefit to such families in Ontario who dedicate a higher portion of necessary expense to child care than the rest of the country.

ABOUT CANCEA

CANCEA is a state-of-the-art interdisciplinary research organization that is dedicated to objective, independent, and evidence-based analysis. They have a long history of providing holistic and collaborative understanding of the short- and long-term risks and returns to prosperity behind policy decisions.

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