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Is there still a middle class in our electric future?

Canadian realtors are working overtime after closing a second month of record MLS Sales in September. Mortgage specialists, conveyancers, notary publics, home insurance agents, building inspectors and the other professionals who make the entire complex real estate process happen are keeping pace with the life changing decisions BC residents are making. A prominently sellers market still prevails, sold over asking and multiple offers for single family detached homes are being reported. All the while market analysts are ringing the alarm bells that we have begun the descent into the market correction of up to 18% that CMHC predicted this May. 

Buyers in solid enough financial positions continued to purchase and created an extremely competitive market in BC’s Fraser Valley, the Agassiz / Harrison area was top of the list for thousands of buyers wanting to remain close to greater Vancouver. Listed properties are still being sought after all the way to the Yukon border even as the snow blankets the province in the Cariboo region and north. National home sales were up 46% year over year this September. Residential migration tell us that rural detached homes offering large lots or acreage, green space & privacy are being sought out. Buyers want acreage as much as they can afford. Owning land offers the freedom to have your own safe private outdoor space, and secluded green space has even more of a draw, as we face a large second wave of the Covid19 virus.

Why are so many people on the move in the middle of a national health and economic crisis while others have anchored themselves to the security of their current home?

2020 will be known for many tragic happenings including the “great displacement and impoverishment of the middle class Canadian”. Residents forced to move because of business closures, job losses, ongoing work from home policy, school closures, generational re-cohabitation, and now add to that list home owner insolvency. What began in April, can be likened to a run away train that has swept up thousands of unwilling passengers on its now speedy course to the next stop, market correction.

National rents statistics show a declined of 9%, and 2nd quarter Vancouver rents declined by 17%! that’s asking rents. Condo inventories continues to increase and soften the multi-unit market, as a record number of newly completed units in BC are now ready to sell, completing when the demand is impaired. So, how does the predicted insolvency monster we have been fearing derail all the efforts of money printing and stimulus deferrals?

The numbers explain it best; CMHC insured mortgages in deferral at the end of August showed Vancouver at 11%, Kelowna at 12%, Calgary at 18%, Edmonton at 21%, Regina at 14%, and Toronto at 12%. CMHC only insures mortgages under a million dollars pointing to the middle class as the biggest demographic of these percentages. November will be the beginning of the end of home ownership for those who are 90 days delinquent and 6 months deferred. Lenders will have no choice but to begin foreclosures.

Furthermore, The Bank of Canada has now announced that it is putting an end to Canadian Mortgage Bond Purchasing Program (CMBPP) at the end of October. Mortgage Bond Purchasing by the BOC provided the needed liquidity to soak up the excess supply, tighten the spread and lower the bond yields to bringing down mortgage rates so banks could continue to lend money and facilitate all the activity. The exit of the CMBPP leaves long term collateral damages like double digit price growth and widens the wealth inequality gap between renters and asset holders even further. The BOC had a primary directive to stabilize the economy with the Bond Purchasing Program and stated the widening wealth gap is a by-product of this best policy approach. 

Wealth or Income distribution is directly related to how well the economy functions and the everyday uncertainty in which we continue to exist has transformed the existing affordable housing crisis into a Canadian crisis of poverty. Homelessness is a reality that we don’t see reported on as it doesn’t fit the narrative needed to bolster economic confidence. The low income working poor that survive day to day and month to month and are becoming a large statistical group labelled collateral damage of BOC pandemic liquidity stimulus that was designed to ensure that asset holders could weather the storm and keep their homes.

Along with housing prices, the cost of living increased in 2020 and we are bracing for another 22% increase to the federal carbon tax which will again raise the cost of everything we consume. When the median middle class wage is not enough to keep a family fed, clothed and housed, the wealth gap widens and swallows more middle class citizens into a debt cycle with
no end. 

Many people are now loosing their homes & apartments after job losses that are now permanent and it is yet to be seen if those citizens are able to find low income rent or face homelessness. One-third of British Columbians struggle to pay their bills, while one out of five children in B.C. already lived in poverty even before the pandemic began. With our cost of living to only rise, people once considered middle class, with high debt ratios, already living pay check to pay check may be hard pressed to avoid becoming the working poor. 

There is allot of talk in Vancouver right now, with crime and public safety related to large amounts of homeless citizens and tent cities as an issue with no quick solution. For a “single”, with no current job options, existing on provincial assistance gets a shelter allowance of $385/month, dramatically reducing housing options. There needs to be more dialogue about what is the actual cause of the homelessness, which is impoverishment. At a time when the federal government deemed the Canadian Emergency Response Benefit needed to be $2000 a month for the average Canadian to stay housed and well-fed during this pandemic, the current unemployment and social assistance rates fall way short of that figure.

BC’s once thriving middle class has been under an economic assault for several years. Record job losses in the forestry/lumber mill and oil and gas sectors began in early 2019 due to environmental pressures and International trade policy. Those permanently curtailed positions that paid middle class wages once sustained many BC residents in a comfortable middle class lifestyle, and many of those individuals went into the pandemic in already dire financial circumstances after closures and curtailments. 

Our incumbent NDP Government, just won another 4 year term to steer the province financially through the pandemic and into economic recovery. They did not campaign on revamping the forest industry to reopen mills or badly needed oil and gas sector projects and yet they need to create thousands of good paying jobs and offer retraining for those affected to begin to turn the economy around. Mill production workers, oil and gas workers, and unemployed airline, and hospitality workers need to see quick action and a reason to stay in their communities.

The NDPs says it has a plan for BC’s future in this global green electronic age. Our federal and provincial governments are moving away from fossil fuel extraction and refinement and want us all to become green energy advocates to meet emission and climate targets. If the way forward is with electricity generated from renewables like solar and wind and hemp fibre production and processing then these industries must create jobs that sustain citizens across the province. 

In conclusion, electric cars, solar energy generation and smart homes that generate their own energy needs are all great ideas to improve our planet, but this huge shift away from economy building industrial mainstays during the pandemic has put BC citizens and businesses in an even weaker position with a tougher road back to financial stability.

We can only hope that the middle class that the government counts on for economy growth spending will still be around to enjoy the electric future they have planned for us. 

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