Business leaders are sounding the alarm, pointing to the housing crisis as the biggest threat to Canada's economy. According to a recent survey conducted by KPMG Canada, a staggering 94 percent of respondents agree that the high costs and limited availability of housing pose significant risks. The survey, which reached out to 534 businesses, highlights the urgent need for attention to this pressing issue, especially in the upcoming federal budget discussions.
The repercussions of the housing challenges extend beyond the real estate market, impacting various sectors of the economy. Businesses are finding themselves compelled to increase wages to attract talent amidst soaring living expenses. Caroline Charest, an economist and partner at KPMG based in Montreal, emphasizes the strain on businesses, stating that higher wages not only dent their finances but also exacerbate inflationary pressures, consequently maintaining high interest rates.
Moreover, the burden of exorbitant housing costs coupled with high debt levels is placing immense strain on households, rendering them more vulnerable, particularly during economic downturns. Charest underscores that the inflationary impact of soaring housing costs further complicates efforts to lower interest rates, which are vital for economic stimulus.
This sentiment echoes concerns previously raised by business entities, with reports from organizations like the Ontario Chamber of Commerce highlighting the detrimental effects of the housing crisis on talent acquisition. Nearly 90 percent of surveyed businesses advocate for increased collaboration between the public and private sectors to tackle the housing shortage effectively.
The federal government has taken some steps to address the issue, including providing funding support to other levels of government and introducing incentives such as GST rebates for rental housing construction. However, its direct influence remains limited. Nevertheless, there is a consensus among business leaders for tax measures aimed at easing housing affordability, such as making mortgage interest tax deductible, while preserving the capital gains tax exemption for primary residences.
Efforts to understand business sentiments were conducted in February through the Sago's Methodify online research platform, targeting business owners and high-level decision-makers. The survey sample represents a diverse range of companies, with a significant proportion generating revenues exceeding $500 million, underscoring the breadth of concern across various business scales.
In conclusion, the housing crisis stands as a formidable challenge to Canada's economic stability, as indicated by the resounding concerns voiced by business leaders. Urgent and concerted efforts, encompassing both public and private sectors, are imperative to address this multifaceted issue and safeguard the nation's economic resilience.
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