Effects of Prime Minister Trudeau’s tax hikes
Middle class Canadians, small business owners and first time immigrants have expressed their disappointment after Prime Minister Trudeau’s five tax hikes in 2023. The five tax hikes subjected the working class earning a salary at a cut off value of 66,000$, to an additional tax of 255$ for the Canada Pension Plan tax of 2023. Meanwhile, the government also has made it evident that the lower and middle class, especially single mothers and seniors barely surviving on pensions, will be the ones most affected by the carbon tax following Trudeau’s announcement of raising the carbon tax from April 1st 2023.
Bleache and Slotsve in 1996 defined the middle class with an income that is 50-150% that of gender specific median level of earnings. In 2022, Pew categorized the middle class into single adults and families of five having a yearly income of 30,000$ and 67,000$ respectively. With basic necessities becoming harder to fulfill each passing day and the soaring inflation rates, getting a home in Canada notably in Toronto and Vancouver has become a distant dream for middle class households meekly trying to stretch their earnings to the end of the month.
While going live with the report in New York Times, OECD secretary general Angel Gurria, on observing the crunched middle class in Canada commented: “Today the middle class looks increasingly like a boat in rocky waters”. The comment aptly describes the hardship that the middle class in Canada have become subjected to due to unfair policies in the socio economic system and unprecedented inflation rates.
House Affordability for the Middle Class in Canada
Affordability is subjective however owning a house is regarded as a luxury that now seems further and further away from the reach of middle class Canadians. The average house price in Canada was estimated to be 500,000$-600,000$ as of 2023.
According to ReMax Canadian Real Estate Industry trends report, Canadians expressed one of three concerns with regards to house affordability. 34% of those included in the report warranted a concern over rising cost of living attributed to high rates of inflation, the 25% held the lack of affordable actions culpable for house unaffordability and the other 25% complained about the exploding cost of rents across the country. Nevertheless, the rather optimistic 32% of the responders reported a positive expectation of the house market correcting and balancing as the year 2023 progresses.
According to CREA (Canadian Real Estate Association), house prices in the expensive regions like Ontario and British Columbia have downsized compared to provinces of moderate inflation like Alberta, Newfoundland and Saskatchewan. Taking into account the average price of
of single family housing in Saskatchewan, 345,100$ as of August 2022, living costs appear potentially affordable if one is ready to survive the harsh winter and scarce job opportunities. And despite the downsizing of house prices in Ontario, British Columbia, they stay infinitely far off from the reach of the middle class considering the average house price in the regions to start from 500,000$ and stabilize at a whooping 1.3 million$ in Toronto and as high as 2 million$ in economically vulnerable cities like Vancouver.
In the ReMax survey, 22 percent of respondents revealed their sentiments about policy making that should now be geared towards the “missing middle” housing gap through development reforms. Additionally, the majority (66 percent) demanded that the Canadian government make housing affordability and the supply crisis a top priority in social reforms.
Ground Realities of the Canadian Housing Market
Amidst the drop in house prices after the COVID 19 pandemic, the Bank of Canada Index that measures the disparity between house ownership and general affordability, has spiked, signifying the imbalanced relationship of affordability and median income. The average house price in Canada is now reported to sit at a value 7 times greater than the average income. We do not mean any fear mongering but reports mention the price valuation benchmark in Ontario and British Columbia stabilized at 11.5 and 12 respectively.
Based on the current reports by Statistica Canada, a 670$ monthly rent raise would have to be paid by the average renter in the bottom income quintile. The public remains unified on the demand of policy revisions to make housing accommodations accessible to those struggling against the wide income gap and disproportionately high inflation rates. Boosting supply across segments is expected to relieve the pressures on the housing market. Canadians however try to stay hopeful in face of extreme adversity and expect the government to support those with the least access to comfortable shelter and housing.
