Housing crisis hurting employers’ ability to attract and retain talent, finds KPMG report
Nearly all (94%) of small- and medium-sized businesses (SMBs) say high housing costs and lack of supply are the biggest risks facing Canada's economy and should be the top priority in the upcoming federal budget, according to a KPMG report.
That is because the Canadian housing crisis is a huge problem for Canadian employers.
Overall, 87% say the rising cost of living – driven largely by housing costs – is forcing their organization to pay more to attract and retain talent. Currently, 87% of businesses are budgeting for higher labour costs due to competition for talent, inflation, and the high cost of affordable housing.
And 81% say the high cost/lack of affordable housing has hurt their ability to attract and retain employees.
"The ripple effects from the high cost of housing and lack of supply are being felt throughout the economy," says Caroline Charest, an economist and Montreal-based partner at KPMG in Canada.
"New and young Canadians are being shut out from purchasing and are finding rentals scarce and costly. Those who were able to enter the market a few years back due to record-low interest rates now face the risk of default when their rates reset at upwards of three times what they pay now. All this is weighing heavily on business leaders struggling to attract and retain key personnel and talent, particularly in urban areas that have witnessed the highest increases in the cost of housing and in regions where housing is scarce."
Subsidised housing may be the dealmaker for many prospective employees, according to a previous report.
How to solve the housing crisis in Canada?
Nearly nine in 10 (89%) of employers say that solving the housing crisis will require public-private sector collaboration, according to KPMG’s survey of 534 employers.
About the same number (86%) of employers believe the government should use the income tax system to make housing more affordable, including making mortgage interest tax deductible. And 88% say the federal government should maintain the current capital gains inclusion rate (50%), as well as the Principal Residence Exemption and Lifetime Capital Gains Exemption.
Also, 85% believe that the government needs to introduce innovative, repayable tax measures that provide relief to existing homeowners faced with mortgage renewals – which will serve as a buffer against mass mortgage defaults similar to the Tax-Free First Home Saving Account for Canadians saving for a home.
"Our survey revealed strong support from the business community for innovative tax measures to increase housing supply and construction and provide relief to homeowners dealing with higher interest rates and mortgage renewals,'' says Brian Ernewein, senior advisor at the National Tax Centre, KPMG in Canada.
"While we can debate whether the tax system is the most effective mechanism to help address Canada's housing challenges, there is a clear view among business leaders that further fresh thinking is needed, and that government has a critical role to play."
One employer is helping employees in purchasing a home by providing them with down payment and closing cost assistance of up to $13,000 in the form of a loan forgivable over a five-year term.
How is Canada dealing with the housing crisis?
Recently, Prime Minister Justin Trudeau announced that Ottawa is creating a new $6-billion Canada Housing Infrastructure Fund, according to reports from Reuters and CBC.
"We're taking the challenge of building more homes, faster, in this country head-on … This is how we'll address the shortage of housing options for Canadians," Trudeau said, according to the CBC report. "This is how we will make it fairer for younger generations who feel like they are falling behind because housing costs are too high."
From the $6 billion funding, Ottawa will allocated $1 million to to municipalities to support urgent infrastructure needs such as water and sanitation, according to Reuters.
The remaining $5 billion will be for agreements with provinces and territories to support long-term priorities.
Ottawa also said it is topping up the $4 billion housing accelerator fund launched last year by C$400 million, according to the report.
Previously, Nova Scotia allocated millions in funding to provide more modular housing for healthcare workers and skilled tradespeople in communities where housing options are limited.