INFLATION IS NOT PROSPERITY - THE HOUSING BOOM IS NOT AFFLUENCE
Johanna Raso
Retired professional seeking opportunities to apply my expertise for impactful results. Experience in asset management, financing, business management, coaching, philanthropy, university lecturer and published author.
By Johanna Raso, MBA
A decade ago Canadian Banks congratulated themselves on their disciplined underwriting, compared to American institutions, where average household debt was above 160%. That was then.
Since 2008 with eyes wide open, Canadians have walked into the same financial position. Our current household debt, according to CMHC, is 168%.
Recent increase in property values in Montreal and elsewhere is not prosperity. We are not getting wealthier. In fact we are poorer. This is true despite record profits by corporations and banks, and increased municipal tax revenues from rising property values. Corporations, municipalities, and banks are not suffering from the housing “boom.” Canadians are suffering. The middle class has not seen a true income increase for 20 years. Having retired and paid off their mortgages, Baby Boomers are paying monthly carrying costs and property taxes equal or exceeding mortgage payments; this at a time when they can least afford it. And housing is not the only issue.
At a recent IT conference several Quebec high-tech firms with global reach reported 10,000 people applying for local jobs from overseas. One local participant asked, “What about jobs for our youth? We have high unemployment here, yet you hire foreigners.”
Corporate profits benefit shareholders and management’s incentive program. Their bottom line is not community oriented, profits seem to be for the sake of profit.
Another delegate asked about the language issue in Quebec. A panel member stated there was no problem. “We speak more English in Montreal than they do in Vancouver.” One cannot lobby a foreign investor to relocate his business to Montreal, with that answer.
Housing, the middle class, baby boomers, millennials, foreign investors, and language are a series of discrete problems, addressed by each group without dialogue on the interrelated factors.
We have confused what is essential and what is popular.
It is no secret that the Montreal workforce has a serious lack of 35-year olds due to its inability attracting and keeping young workers. The language question is not popular. Youth and middle class are crucial to sustained growth. Small and medium businesses are affected by weakened purchasing power. Affordable shelter and job opportunities are decreasing; prosperity is on the decline. Corporate losses are passed to the consumer. Poverty is created. We are poorer each year.
At The International Economic Forum of the Americas, in June 2010, anticipating further property value increases, I asked Mark Carney then Governor of the Bank of Canada, what measures we could take regarding foreign investments. He assured me the government was looking at it. I suggested the possibility of a different interest rate for foreign investors, and additional taxes. British Columbia introduced a 15% tax on foreigners buying residences in the Vancouver area in an effort to slow foreign speculation, a few months ago.
At the same Forum, in June 2016, I asked The Honourable Bill Morneau, Minister of Finance, how since 2008, we have created a housing crisis in Canada, with our eyes wide open. The answer was, “We are looking at it.”
I would like to have new dialogues so new rules could emerge and be applied, placing our economy on the right path. Every Canadian has the right to affordable shelter. We must better monitor foreign investment. Corporate profits must be filtered back to the community (to support youth training programs). Minimum wage should be tied to productivity. With time, and with our eyes open, we will see incomes rising and poverty falling.
Johanna Raso, MBA
Asset Management [email protected]
April 20, 2017 Montreal, Quebec, Canada
From a presentation initially made in 2010
PHOTO: The Honorable Bill Morneau, Federal Finance Minister (L), and Angel Gurría, secretary-general of OECD (R), at The International Forum of the Americas, June 2016. Photo Credit: Johanna Raso
Retired professional seeking opportunities to apply my expertise for impactful results. Experience in asset management, financing, business management, coaching, philanthropy, university lecturer and published author.
7yI have spoken about this during presentations over the last several years. It is really all about our financial model. It needs to be updated. The way we assess property also may be in need of review. The current financial model is ‘flawed’ and creates discrepancies. These in turn are creating poverty among Montrealers, including but not limited to the middle class. Yes, we need foreign investment, but not at any price. There is a middle ground, beginning with dialogue, and concluding with a better monitoring system.This debate was predictable and was predicted. Dialogue is the key. Let’s talk about it.