“I will be very frank: housing is not a main federal responsibility,” said Justin Trudeau at the end of July.
He wasn’t wrong. Provinces and municipalities are more responsible. But Ottawa also has a role to play, and Mr. Trudeau gave the impression of not taking it seriously. A few months later, reality caught up with him. This crisis becomes the priority of its economic update.
In the past, the Liberals were interested in housing, but they mainly targeted demand. In particular, they helped first-time buyers by creating a new account, the CELIAPP, which allows you to both reduce your taxable income (like the RRSP) and pocket a tax-free return (like the TFSA).
The gift pleased voters. But it had the drawback of accelerating the feverish rise in prices.
This time, the Liberals are adjusting their approach.
The Minister of Finance, Chrystia Freeland, is instead targeting the supply side. It adds 15 billion in loans to build apartments. And several other measures will be at zero cost (or better) for the State, such as the end of expense deductions for units offered on Airbnb or VRBO and better conditions for negotiating a mortgage loan.
Basically, it’s good. And strategically, this update provides liberals with something valuable: some time. Because if elections were held tomorrow, they would take a beating at the hands of the conservatives.
But time could still run out on them. Because we will have to wait a long time before seeing the effect of the measures. And if they work, their impact will be difficult to distinguish from that of recent announcements from provinces and municipalities.
Not to mention that even though the Liberals are stimulating supply, they are also increasing demand by keeping temporary immigration at a record level.
Mr. Trudeau must hope that two things happen in the coming months. First, an economic improvement, with inflation slowing and interest rates stabilizing or, miraculously, falling a little. Then, a political storm, with the fear of an election of Donald Trump in the United States which would encourage Canadians to distrust Pierre Poilievre, despite the many differences between these two characters.
In other words, it sounds like a prayer.
Mme Freeland seeks a precarious balance between seemingly contradictory goals: silencing conservatives who accuse him of spending too much and pleasing New Democrats who are calling for help for the victims of inflation and the housing crisis.
This mission is all the more perilous since the Liberals have reduced their room for maneuver by acting in an unusual way.
A government usually prefers to carry out delicate reforms at the start of its mandate. It is then more popular. It is also more likely that voters will have forgotten by the next campaign. And if necessary, he can invoke the trick of the “hole” left in public finances by his predecessor. At the end of his reign, he then distributes electoral offerings.
The Trudeau government did the opposite. For example, a clash is brewing with the West over strong environmental measures still being developed.
Mr. Trudeau has also been atypical in his economic approach. A government usually tries to balance its budget when times are good, and runs deficits to stimulate growth during downturns. Mr. Trudeau, for his part, boasted of stimulating the economy even when it was outperforming, by banking on almost eternally low interest rates.
As a result, debt payments have increased. For the month of last August alone, they reached 4.3 billion dollars, a record. And once again, the anticipated deficits are revised upwards.
The Liberals have handcuffed themselves, and that is what is forcing Mme Freeland to walk on a wire today. As she recalled on Tuesday, Canada’s public finances are in a rather enviable state compared to those of other G7 countries. But this analysis does not include major future expenditures, such as the creation of a universal public drug insurance plan. The bill has not been tabled and according to the alliance with the NDP, it must be adopted by the end of the year, which seems more improbable than ever.
By November 2022, the Liberals had succeeded in targeting vulnerable people. This time again, they are interested in the right priorities with the housing supply. It remains to be seen whether it is too late to reap the electoral benefits.
The Trudeau government will need a lot of time. For him, braking will not be enough. He has to bounce, and his legs look tired.
His bag of ideas is also emptying. Keeping power is an understandable goal for a government. But this is not a successful electoral project for the population, especially when they are so tempted to look elsewhere.