‘There’s an enormous amount of anger out there’

A Q&A on housing prices and populism with Canadian business journalist Daniel Tencer

A house for sale in Toronto; Richard Lautens/Toronto Star via Getty Images

The streets of Ottawa may be clear, and the bank accounts of protesters may now be released, but the dust is nowhere near to being settled. The events of the last few weeks have triggered a reckoning in this country that could have reverberations for years to come. Certainly, the wave of populism we’ve just witnessed isn’t likely to go away anytime soon. 

What has gone wrong in our society, and our democracy? And what do we need to do to get back on track?

Yesterday on the Lean Out podcast we heard from Canadian economist Jeff Rubin, who had warned in 2019 that economic conditions in this country were prime for populism. 

He wasn’t the only one ringing the alarm. Daniel Tencer is a Canadian business journalist who’s been covering housing for more than a decade and is now a senior editor at MoneyWise. In April of 2021, he published a piece at The Line warning that if we allowed our “unbridled real-estate frenzy” to continue, we risked the rise of American-style populism. I reached out to Daniel yesterday for his thoughts on the trucker protests, and the link between housing prices and populism.

Last spring you published a piece pointing out that home sales in Canada were up 76 percent from the previous year. What got you thinking specifically about the rise of populism?

It was the comments I was seeing on social media. I'm a big Reddit fan, and I was going through the comment sections on house-prices stories and I realized there's an enormous amount of anger out there. People are incredibly frustrated. They're scared. They're scared that they're not going to be able to achieve the standard of living that their parents and their grandparents were able to achieve. For the same amount of work, the same amount of effort, they're going to end up with a lot less. That frustration is building and building. Every time you see one of those stories about house prices up 25 percent, you can be sure that tension is rising with that price level.

I did expect something along the lines of a populist uprising. It wasn't exactly what we got. What we got was related to the pandemic. The opposition coalesced around opposition to vaccine mandates and so on. I was thinking of a kind of populist uprising that would be more directly involved in economic issues, but it's not like economic issues are disconnected from this. Let's consider for a moment the economic circumstances of this trucker convoy demographic. We're talking about people who come from rural communities, small town communities, exurban communities. These places have seen house prices soar 50 to 100 percent over the past two years across Canada.

At the same time, these people — who mostly work with their hands, who are often small business owners, entrepreneurs, independent contractors — have seen their businesses shut down and reopened and shut down. They've seen their economic security go right down the drain while the cost of living in their communities has soared. You can almost think of it as being mechanical: If you let those forces run wild in your society, you are going to get anger. You are going to get heated situations in the street. You'll have civil unrest of some kind. What I worry about now is the reaction of our political class to all of this, which has been not good.

I think maybe the trucker convoy people aren't the only ones feeling frustration right now. I think it might be everybody including Justin Trudeau, because his rhetoric has been inflammatory and has not made things better. Frankly, the tone from Ottawa to this whole situation seems pretty tone-deaf. Yes, there were white supremacists in this protest, carrying around Confederate flags. That to me is so dumb. Even right-wing media in the U.S. was making fun of it. What are these Canadians doing with Confederate flags? So, yeah, there's a lot of stupidity there, but our political leaders didn't bother going any deeper than that to find out what's going on. And that worries me.

An unremarkable bungalow in Whitby, Ontario, just sold for $1.2-million. Give us a snapshot of the data. What does the housing market look like in Canada right now?

Since the beginning of the pandemic two years ago, prices have risen by 20 to 100 percent. New Brunswick, somewhere around 100 percent. Montreal, somewhere around 25 to 30 percent. And then everything else in between. The other thing that's happening is the mix of people who are buying houses is changing rapidly: Fewer and fewer first-time buyers, more and more investor owners. The group of buyers with the largest growth over the last two years have been people who own four or more properties.

In other words, our housing market is increasingly being bought up by wealthy investors. Real-estate income trusts, independent investors, billionaires in Hong Kong or Moscow. That's who's buying up the houses. And it makes sense, because with asset prices soaring the way they have the last two years, the rich people have the most money, right? If you're middle class, you might not have seen that much of a gain in your RRSP, but if you've got millions, you've got millions more now, and you could price people out of any housing market you want. That's essentially what we're seeing in Canada. 

This is all happening in the middle of a pandemic, when a lot of people have been out of work. How does that make sense?

To somebody living in the real economy, working and earning money and paying a mortgage, it doesn't make any sense. It only makes sense at the level of global finance. We all know that the central banks have been printing money like crazy and throwing money into the economy. They've been doing this more and more over the past 20 years. This whole idea of printing money and tanking interest rates to zero was really invented by the Bank of Japan during the dot-com bust 20 years ago. Since then, every central bank all over the world has adopted this policy. What we know now about this policy is that it drives asset prices, including real estate, right through the roof.

Now, that's a great way to intervene in a crisis like the 2008 financial crisis, or the stock market crash at the beginning of the pandemic. You start printing money and you drop interest rates. Those crisis problems will ease and things will start getting back to normal. But the price of that is this asset price inflation. That means every kind of asset, whether you're trying to buy a home, whether you're trying to buy stocks for your RRSP, are much more expensive relative to what people earn.

If you are rich, if you are part of the rentier class and you own assets and you make money off those assets, you're just getting richer and richer, and you're fine. Your yields on those assets, the percentage you make off them every year, is dropping and dropping because the cost of those assets is getting so high. But you don't care, you're rich. For the middle class, it means a harder time buying anything that is an investable asset, including a condo. People sense that. They don't understand necessarily why this is happening, but you're not going to miss the obvious. Two years of intermittent lockdowns, people losing their jobs, businesses shutting down, reopening, shutting down, and the cost of housing has doubled? You’ve got to be kidding me.

Part of the problem, too, is that a lot of these problems are actually being created at the international level. We really need to start focusing there as well. I think part of the reason that governments in the West react with such fear to populist uprisings is because they themselves are aware of how little ability they have to maneuver in this international global system. Canada has dozens of free-trade agreements. It's a member of the WTO [World Trade Organization]. Its ability to change policy, economic policy on a broad scale, is limited by these things. If Justin Trudeau wanted to stop the Bank of Canada from doing what all the other central banks are doing, printing money and keeping interest rates artificially low, could he? What would be the repercussions for Canada internationally?

I think part of the fear comes from the fact that they believe that there might not be anything they can do about it. But I think they're wrong. I think there's a lot you could do. And I think we also should start talking at the international level about bringing these types of institutions, like central banks, under some kind of democratic control.

Another thing I'm wondering about is the issue of explosive growth in housing markets in small towns. The narrative is that this is all office workers who now work from home and have moved out of the city. How much of that is the issue, and how much of it is financial actors?

That's a hard question to answer. I don't know if we can even figure it out from looking at the data that's available. Certainly, it is both. And at this point there's also a large psychological aspect at play. There's such a strong expectation of future price growth among people buying houses that their perspective on how much to pay isn't very grounded. If you expect that house prices will just grow strongly year after year after year, you're going to be willing to pay anything to get in now rather than later. Because whatever you pay, you expect you'll make it back in the long run. I don't know how realistic those perceptions are.

I saw a survey recently that suggested the average millennial in Canada expects house prices to grow 20 percent per year. Twenty percent per year. In a country where incomes grow 2 to 3 percent per year, how's that going to play out? What I worry about, and I've mentioned this in things I've written before, is that if we just let this go on, we will end up in a situation where this sort of landed gentry forms. Where there's this class of people who are wealthy enough to buy properties and rent them out to people. Their children inherit those properties and rent them out to people. While everybody else can't get into the market and you have this sort of permanent renter class. That's the nightmare scenario. But at the rate prices are increasing, I think we get to that nightmare scenario pretty fast. Something has to give, something has to change.

Part of what surprises me about the situation is that, in my opinion, the party that has the most credible policy or program to address cost-of-living issues in Canada is the NDP. I think things that would help the people dealing with financial insecurity, the trucker convoy crowd dealing with financial insecurity, are actually mostly in the NDP platform — or at least the NDP is closest to what they would need. So, that's a great irony. Because the people in the trucker convoy, I don't think would consider voting NDP, and the NDP doesn't want their vote. 

We’ve got the solutions, we've got the voters willing to vote for it, but we can't bring them together because we've got this rhetorical structure that's keeping them apart. It's a kind of political dysfunction. We need to look at it head-on.

Canadian mortgage debt has reached 96 percent of the GDP. What danger does that pose?

We know that Canadian households are among the most leveraged in the world. And that's another thing that's preying on people. Those of us who carry debt, we know that feeling. That's not a good feeling to have hanging over you. When those numbers get really high, as they have for people buying houses today, that stress is going to eat away at them. I don't think you need to look just at the trucker convoy to see people who are under stress, who are frustrated, who feel alienated from the political process. It's everywhere right now. I do wish our political class would focus on that instead of trying to gain political advantage from it.

This interview has been edited and condensed.