Article content

(Bloomberg) — Canadian Prime Minister Justin Trudeau heaped some of the blame for skyrocketing housing costs on high interest rates and inaction by other levels of government, signaling a more defensive tone on an issue where his main political rival has hit him hard.

Article content

Trudeau touted a federal investment in a housing project in Hamilton, Ontario, on Monday, telling reporters that his government is focused on making housing affordable and bolstering the supply of homes for lower and middle-income Canadians.

Article content

But he repeatedly pointed to provinces and municipalities — which control land-use planning, zoning and permitting — as crucial in solving the issue. He also said the previous Conservative government — in which now-leader Pierre Poilievre was a cabinet minister — failed to address the issue for 10 years.

“I’ll be blunt: Housing isn’t a primary federal responsibility,” Trudeau said. “It’s not something that we have direct carriage of, but it is something that we can and must help with.”

Article content

Article content

The rhetoric is a shift for Trudeau, whose government jumped into the housing arena when it was first elected in 2015. He has since rolled out an C$82 billion ($62 billion) national housing strategy and made sweeping promises, including doubling the pace of housing starts over the next decade.

But his efforts haven’t made a meaningful dent in housing costs, with the benchmark house price reaching C$749,100 ($567,930) in June, up 2% from a month earlier. At the same time, he has set record-high immigration targets, welcoming more than a million people last year and straining already crunched housing supply.

The remarks show the government “is giving up on solving the housing crisis it created,” said John Pasalis, president of Toronto-based real estate brokerage company Realosophy Realty.

Article content

“Our federal government is supercharging the demand for housing by rapidly increasing Canada’s population growth rate without any regard for where people will live and is now blaming the provinces and cities for not doing the impossible – tripling the number of homes they build each year,” Pasalis said.

Poilievre has seized upon anger about the cost of housing, especially among young Canadians, and recent polls have put his Conservatives as much as 10 points ahead of Trudeau’s Liberals. An election could be held any time in the next two years.

Trudeau recently shuffled his cabinet to more strongly emphasize economic issues, especially housing. He selected Sean Fraser as housing and infrastructure minister to deliver the message that it understands Canadians’ struggles on housing and is doing everything it can to help.

Article content

Trudeau also said on Monday that he hopes inflation continues to fall so that interest rates will also decline, which would ease mortgage costs for Canadians.

Asked about workers demanding higher wages amid high inflation, most recently in the strike at British Columbia ports, Trudeau said he wants to avoid a wage-price spiral. 

“We want to keep inflation down so we can have interest rates start coming down again to help people be able to afford their own homes,” he said.

The Bank of Canada raised rates for a second straight meeting on July 12 to 5%, the highest level in 22 years. Headline inflation has come down to 2.8% in Canada, but mortgage interest costs are up 30% from last June. Without mortgage costs, inflation would have been at 2%.

Article content

Trudeau said during the 2021 campaign that he doesn’t “think about monetary policy,” underscoring his deference to Bank of Canada Governor Tiff Macklem and his policymakers. While the prime minister’s comments on Monday didn’t criticize the central bank, they did mark a shift in that he publicly expressed a desire to see lower rates.

Fraser also seems to be pointing to interest rates as a source of the affordability challenge in Canada. In an interview with the Canadian Broadcasting Corp., he said inflation – primarily caused by global factors – has triggered higher rates that have pushed some families with variable-rate mortgages to the limit.

—With assistance from Randy Thanthong-Knight.

Article content