The First-Time Home Buyers Crisis

Policy & Technology: The Winning Combination

The Affordable Housing Crisis in both the United States and Canada is garnering headlines again with policy makers garnering criticism for the underwhelming results generated thus far by much publicized national housing programs on both sides of the border.  In Canada, the Office of the Auditor General released a report exposing major issues with the rollout of the National Housing Co-Investment Fund. In the US, the Housing Supply Action Plan has been criticized for being slow to progress and for failing to address the core issues of zoning and land reform need to overcome NIMBYism.

In fact, driven by interest rate hikes introduced to curb post-pandemic inflation, the crisis has only worsened of late with critics charging that the policy incentives introduced to increase affordable housing stocks are having the opposite effect—increasing the number of investors in the market, thus driving up the overall costs of the market at the expense of entry-level buyers. In Canada, the number of renter households (+21.5%) grew at over twice the pace of owner households (+8.4%) between 2011 and 2021 (Source). In the US, investors purchased nearly a quarter (24%) of all single-family homes in 2021, with rents rising by more than 15% to an average of more than $2,000 across the nation between May 2021 and May 2022 (Source).


First-Time Home Buyers Crisis


Given the triple whammy of rising rents and interest rates, and declining affordable housing stocks, many housing experts are now re-framing the Affordable Housing Crisis as one that could be more accurately characterized as the First-Time Home Buyers Crisis. In the US, the share of first-time homebuyers fell to 26% in 2022, the lowest level since the National Realtors Association began collecting such data more than 40 years ago. A study quantifying ‘The High Cost of Housing’ nationally states there is not a single county in America where a minimum-wage worker earns enough to spend less than 30 percent of their income to afford a modest two-bedroom apartment, while in more expensive cities the hourly wage required exceeds $60. In Canada, according to the 2021 census, over 1.5 million households are in core housing need, meaning they live in inadequate or unaffordable housing, and can’t afford alternatives.

For first-time buyers trying to save for a down-payment while simultaneously struggling with the burden of high rent costs, the crux of the challenge is homebuilders have simply not constructed enough affordable houses for them to purchase. Such supply-side issues go to the root of the concerns being raised with the national housing strategies in both the US and Canada, with specific criticisms breaking down as follows:

  • Capital and tax incentives [e.g. CMHC’s National Housing Co-Investment Fund (NHCF) in Canada and the Low-Income Housing Tax (LIHTC) in the US] have lessened costs but not at sufficient scale to put ownership in reach for lower income citizens
  • Targeted housing transfers to alleviate housing affordability pressures are largely ineffective relative to the scale of the inventory gaps.
  • Real estate and mortgage policies reward investors and not affordable ownership.
  • There are enormous shortfalls between market pricing and ‘affordability’ for low-income households across the country.

To put these challenges in context, a recent Housing Affordability report by Scotiabank states that the average renter in the bottom income quintile in Canada would need another $670 monthly to afford a 2-bedroom rental at 2021 prices without exceeding the affordability threshold. In British Columbia and Ontario, this figure exceeds $1000 per month!

The Resurrection of Public Housing Initiatives

While unlocking greater supply across the full continuum of housing remains the optimal solution on both sides of the border, affordable housing experts are increasingly of the opinion that the supply-side shortfall will not be solved with a focus on new builds only, but rather through a broader approach affording options to build, buy, renovate, or retrofit units to add incremental supply to the social housing sector. With the focus shifting to ‘Just Build the Homes,’ many are now advocating for public municipal housing as a primary driver of affordable housing stocks rather than the current market incentives and inclusionary zoning tactics alone. Viewed as a necessary response to overcome the free market’s propensity to cater to more profitable high-end housing inventory at the expense of the lower margin first-time buyer market, policy makers are revisiting the possibilities of national public housing initiatives. Vienna, Sweden, and Finland are three of the countries that stand out in this analysis, with proven public housing initiatives that have proactively overcome projected national housing shortages whilst simultaneously avoiding the depreciation pitfalls and social stigmas historically associated with such government ‘projects.’

Citing the historic success of national public housing initiatives like those created by the New Deal, state and local policy makers are reconsidering the merits of subsidizing wealthy homeowners through mortgage interest tax deduction in favor of subsidized public housing. By generating construction jobs, public housing development acts as a countercyclical stimulus measure, boosting employment in a critical sector with significant multiplier effects across the entire economy. In theory, reducing the share of income that poor and working-class people pay to rent does the same, putting cash in the pockets of the people most likely to spend it, particularly during an economic downturn.

Policy & Technology: The Winning Combination


With so many options on the table and citizens demanding a vigorous and timely response, particularly in the most overheated real estate markets, community development agencies are more reliant than over on versatile permitting solutions that equip them to navigate this rapidly evolving regulatory environment. Recognizing the critical role that efficient permitting software systems like POSSE PLS play in the effort to fast-track development plans to increase the speed-to-market for affordable housing initiatives of all stripes, agencies from Pittsburgh to Edmonton are leveraging online permitting and licensing portals to drive the pace. In contrast to municipalities hamstrung by inefficient and archaic systems, those cities leveraging modern planning and permitting technology have eliminated a key barrier to housing affordability supply. Now, whether an affordable housing initiative is market driven or government led, or both, Powered by POSSE agencies have the workflow automation and seamless system collaboration required to react in an intelligent and agile fashion to emerging risk factors and market conditions. The result is a more informed, data-driven civic planning process, one that is better equipped to respond to evolving economic factors and changes in public demand.

Such technology innovation in tandem with forward-thinking policy is the crucial combination that will ultimately overcome the challenges of the housing crisis, ensuring that the dream of home ownership remains a visible and viable opportunity for current generations and beyond. But the clock is ticking. The breadth of analysis on this most crucial of public policy issues is well informed and incisive but legislators must be careful to not run the risk of paralysis through analysis. Today’s affordable housing shortage is not an abstract concept. It’s a harsh reality for more North Americans with each passing day. The time to act is now with prescient policies and the robust technology required to bring new developments to market quickly and efficiently.

Why not start the process now by scheduling a Discovery Demo of POSSE PLS, our leading edge solution for planning, ePlans, permittinglicensinginspections, and code enforcement—supported by our industry unmatched 100% project success rate?