With the Affordable Housing Crisis still dominating much of the economic agenda in the United States, government policymakers and housing experts are increasingly focused on the question of how the housing crisis will be impacted by Donald Trump’s return to the Oval Office? Based on both proposed and past legislation from the Trump administration, as well as campaign rhetoric pertinent to the housing file, the new administration is expected to impact several key areas such as deregulation, tariffs, tax incentives, mass deportations, and federal land management.
In Canada, the Affordable Housing Crisis persists particularly in Vancouver and Toronto where skyrocketing home prices and rental costs are placing the dream of homeownership increasingly out of reach for young Canadians. While the housing crisis is predominantly driven by domestic factors such as regulatory inefficiencies and supply shortages, the impacts of economic policies in the US will also have substantial ripple effects north of the border.
With a second Trump administration taking office in January of 2025, anticipated policy changes are certain to exacerbate Canada’s Affordable Housing Crisis in several key areas:
The incoming U.S. administration’s fiscal policies are expected to focus on two cornerstone policies:
Economists anticipate such policies will raise the U.S. deficit, with all three factors working to increase inflation thus driving bond prices upward. According to Mortgage Strategist Robert McLister, such policies indirectly raise Canadian bond yields causing fixed mortgage rates to raise along with them. These inflationary pressures would limit Canada’s ability to continue the current trend of interest rate cuts, potentially limiting Canada’s hopes of stemming a recession.
In addition to the knock-on effects of rising inflation, economists indicate that broad-based tariffs could sharply reduce U.S. GDP and increase unemployment, additional factors that potentially drive interest rates upward.
For the average Canadian, this means borrowing costs would increase, making mortgage costs more prohibitive which simultaneously puts more supply pressure on the rental market driving subsequent rent inflation.
With a new Trump administration confirming its intent to facilitate the mass deportation of migrants, the anticipated reduction in the number of refugees accepted into the U.S. could have a spillover effect on Canada. Immigration applications to Canada would likely rise, increasing demand for affordable housing, particularly in U.S. adjacent cities like Toronto, Vancouver, and Montreal.
Conversely, increased immigration restrictions could feasibly lead to fewer people moving to North America thereby easing housing demand in some of Canada’s most expensive cities. While this offers a potential silver lining to temporarily mitigate the housing crisis, a decrease in Canadian immigration would likely exacerbate the supply issues impacting affordable housing inventory with the construction industry disproportionately reliant on immigrant labor for the crucial role of building much needed new housing stocks.
Under the previous Trump administration, cuts to the U.S. Department of Housing and Urban Development (HUD) budget led to a reduction in federal support for affordable housing projects.
While Canada has its own system for funding social housing, U.S. housing policies focused on deregulation and reductions in public housing funding could inspire similar policy positions in Canada. Particularly if more conservative governments are emboldened by this direction, subsequent cuts to housing programs and a diminished focus on affordable housing could worsen the Affordable Housing Crisis, particularly for low-income renters and first-time homebuyers.
Stateside, the potential impacts of the next Presidential administration on the Affordable Housing Crisis are complex and multifaceted.
On the positive side of the ledger; increased deregulation and tax incentives in conjunction with federal land reallocations carry the potential to increase pathways to timely and affordable housing provision. On the negative side of the ledger; tariffs, mass deportations, and the elevation of private investment interests could worsen the crisis by increasing construction costs and delays, and incentivizing production towards the luxury end of the market instead of much needed affordable housing inventory.
While Canada has some insulation from U.S. housing policies, the interconnectedness of the two countries’ economies means that Canadian housing markets could be directly influenced by U.S. political decisions. As detailed above, such impacts could be felt in areas as diverse as rising interest rates, borrowing costs and labor shortages, to more restrictive policies and supply-side incentives.
In response, Canada’s government policymakers and housing experts will need to remain proactive. By staying focused on protecting affordable housing programs, increasing housing inventory in those areas most affected, and maintaining sustainable immigration policies to mitigate emerging labor shortages, Canada can preserve the dream of affordable housing ownership for this generation and the ones to follow.
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