The Globe and Mail - 30.07.2019

B4| REPORTONBUSINESS OTHEGLOBEANDMAIL | TUESDAY,JULY30,

OPINION&ANALYSIS

DILBERT

T

hree years ago, the British
Columbiagovernment dra-
matically increased the
property transfer tax rate paid by
foreign nationals and corpora-
tions purchasing residential real
estate in Metro Vancouver, fol-
lowed by a host of similar policies

• including a “speculation and
  vacancy tax” on homes deemed
  underused by the province, and
  an “empty homes tax” in Van-
  couver proper.
  Other parts of Canada took

note, with Ontario also raising

the property transfer tax rate on

foreign nationals in the Toronto

area. And theTrudeaugovern-

ment imposed a new “stress test”

on mortgage applicants in 2018.

All these initiatives share a com-

mon assumption – that there’s

too much demand for housing in

Canada’s most expensive cities

and, to boost affordability, some-

thing must be done to reduce

that demand.

The result?

Although it’s difficult to estab-

lish causality, targeting certain

sources of housing demand (for-

eign nationals, summer home-

owners, first-time buyers) ap-

pears to have affected prices. For

example, the property transfer

tax increases on foreign buyers in

B.C. and Ontario were followed

by important declines in sale

prices (approximately 3 per cent

to 4 per cent in Greater Vancouv-

er and 9 per cent in the Greater

Toronto Area) after the new taxes

were implemented. Despite a re-

bound in prices (especially in

Vancouver), thefederalgovern-

ment’s 2018 increase of the mini-

mum qualifying interest rate to

obtain a mortgage (the “stress

test”) was followed by another

decrease or flatlining in home

price growth in these two big

markets.

So the demand-side policies of

the past three years may have

helped cool otherwise red-hot

housing markets. But the funda-

mental problem – broad housing

affordability – remains unresolv-

ed.

Compared with a decade ago,

home prices remain more than

90 per cent higher in Vancouver

and 120 per cent higher in Toron-

to. There is a shortage of available

rental units, pushing rents higher

in already tough markets. For all

their potential appeal (including

their political popularity), de-

mand-reducing policies have

seemingly done little to restore

broad housing affordability.

So what can be done?

The laws of supply and de-

mand apply to housing, like any

other good. By focusing primarily

on demand, policy-makers ig-

nore half of the equation and

overlook key tools in govern-

ment’s arsenal to help reduce

housing prices.

Thankfully, supply-side policy

seems to be gaining currency in

Ontario. The Fordgovernment’s

“housing supply action plan”

adds some much-needed per-

spective in the housing policy de-

bate. Notably, thegovernment

wants to update key land-use

planning policy to encourage the

rapid approval and construction

of more housing. This follows im-

portant legislation passed earlier

this year that, among its many

elements, includes capping and

streamlining the fees municipal-

ities charge homebuilders, the

deferral of such fees for rental de-

velopment and permitting more

secondary suites (such as lane-

way and basement units). While

more could be done to increase

the supply of housing, such as

opening up the “yellow belt” of

lower-density residential neigh-

bourhoods to more develop-

ment, thegovernment appears to

be moving in the right direction.

Over the past three years, gov-

ernments across Canada – nota-

bly in B.C., Ontario and Ottawa –

have overwhelmingly targeted

the demand side of the housing

equation. Despite recent cooling

in home prices, housing in the

country’s most expensive cities

remains in high demand and out

of reach for many renters and

would-be buyers. It’s time to shift

the housing affordability discus-

sion away from discouraging

buyers and toward the construc-

tion of more homes. Govern-

ments must recognize that sup-

ply is half of the equation.

Lawmakerscan’tignorehousing-supplyissue

Byfocusinglargelyon

demand,governments

areoverlookinghalf

oftheequationfor

greatera ffordability

JOSEFFILIPOWICZ
STEVELAFLEUR

OPINION

AnalystsattheFraserInstitute

Foralltheir·otential

a··eal¹includin‚their

·olitical·o·ularityº,

demandreducin‚

·olicieshaveseemin‚ly

donelittletorestore

broad housin‚

affordability.

B

HP Group Ltd. may just
have set the template for
how resource companies
are going to deal with the chal-
lenge of climate change, even if
some of its competitors would
prefer a course of more talk and
less action.
The world’s biggest miner an-
nounced on July 23 that it will in-
vest US$400-million over five
years to reduce emissions.
While this move is both laud-
able from the perspective of
combating climate change and
sensible from the point of mak-
ing BHP a more attractive pur-
chase for ethical investors, the re-
al game-changer is BHP’s move
to include emissions beyond
what it directly produces.
The Anglo-Australian miner is
the world’s largest exporter of
coking coal used in steelmaking,
the third-biggest iron-ore miner
and is also a significant producer
of copper, crude oil and liquefied
natural gas (LNG).
BHP chief executive Andrew
Mackenzie said the company
would be looking to address
Scope 1, 2 and 3 emissions.
“We won’t stop at the mine
gate. We will also increase our fo-

cus on Scope 3 emissions,” he

said in a speech in London last

week.

Scope 1 and 2 cover an orga-

nization’s direct and indirect

emissions generated by its own

activities and the power it buys

to run its operations.

Scope 3 is the real issue for

many resource companies, as it

covers the emissions created by

the use of the products.

Thus, an iron-ore miner such

as BHP and rival Rio Tinto would

account for the emissions creat-

ed by the burning of coal when

the iron is turned into steel in the

blast furnace.

Scope 3 would also include

items such as the fuel used by

ships and trains in the destina-

tion country.Up until now, this

has been an area that most min-

ers and oil and gas companies

would prefer to ignore, or even if

they can’t ignore it, they’d rather

talk around the issues rather

than tackle them.

Scope 3 accounting is also a

potential issue for governments,

as a country such as Australia

would see its share of global

emissions skyrocket if it had to

account for the emissions creat-

ed by the use of its exports of raw

materials.

Australia has just overtaken

Qatar as the world’s largest ship-

per of LNG, it vies with Indonesia

for the title of world’s biggest

coal exporter and it is the top ex-

porter or iron ore.

But if having to account for

Scope 3 emissions becomes more

commonplace, it may also force

resource companies to put pres-

sure on customers to become

more efficient and less carbon-

intensive in their operations.

It may become the case where

companies such as BHP will

choose to favour energy-efficient

customers over those with more

polluting operations.

Assuming that the product be-

ing supplied is in demand and

not in surplus, this may force

companies, such as some steel

mills in China, to become more

efficient in order to secure the

necessary iron-ore supplies.

The other major point that Mr.

Mackenzie made in his speech is

that combating climate change

means adopting what he termed

an “all of the above” approach, in

which a multipronged program

is followed. This means govern-

ments, companies, environmen-

tal groups, scientists and individ-

uals will have to become invest-

ed in mitigating the impact of cli-

mate change.

This will be a major challenge,

given some important govern-

ments, such as the administra-

tion of U.S. President Donald

Trump, are effectively climate-

change deniers, and they are

joined by numerous resource-

company chief executives.

Activists on the left side of pol-

itics have also tended toward

what may be termed single-issue

campaigns, such as efforts to

stop new coal mines or natural

gas fracking.

While these campaigns raise

awareness and may even halt

some new fossil fuel develop-

ments, they do little to assist

with a global response to a global

problem.

BHP head Mr. Mackenzie is

moving his company in an inter-

esting direction. By accepting cli-

mate change is real, and then

committing to actions well be-

yond BHP’s current legal obliga-

tions, he may well drag others

along, even if they are reluctant.

Much will depend on whether

investors reward Mr. Mackenzie’s

innovation, or whether they de-

cide that dealing with climate

change isn’t yet good business

sense.

/EUTE/S

Anglo-AustralianminerBHPaimstoaddressScope1,2and3emissions,itsCEOsays.Thefirsttwoscopescoveracompany’sdirectandindirectemissionsgeneratedbyitsactivitiesand
thepowerusedtorunoperations.Thethirdscopeisthebighurdleformanyresourcecompanies,asitinvolvesemissionscreatedbytheuseofitsproducts.SONAIPAU//EUTE/S

WillBHP’sbidtocutemissionsinspireotherstofollowsuit?

CLYDERUSSELL
LAUNCESTON,AUSTRALIA

OPINION