Tax Cuts and the Housing Market: Ottawa

Context A CBC News article discussed the possibility of the Canadian economy heading into a recession, or whether the country has already passed that threshold. The article discussed this possibility based on slowed growth, high inflation, and the Bank of Canada’s continued interest rate hikes. Analysis A recession is a significant reduction in economic activity that occurs over a length of time, usually months or years. One of the most accepted definitions of a recession comes from the economist Julius Shiskin in 1974, who identified the threshold to an economic recession as two consecutive quarters of declining GDP, although economists often argue about the comprehensiveness of this measure. The causes of a recession can be quite complicated and have many contributing factors. Some common examples include a sudden economic shock such as the recent COVID-19 pandemic, excessive debt, asset bubbles, inflation, deflation, or large technological changes. One major factor influencing the probability of an economic recession includes rising interest rates from the Bank of Canada, which has implemented the highest hike in the shortest amount of time in all of the bank’s history, raising the rate over eight times since 2022. The Bank of Canada increased interest rates in order to curb inflation since rising interest rates discourage taking on debt and spending. This further encourages companies to lower prices or slow inflation to increase demand. Currently, the Bank of Canada is keeping at the 5.0 percent rate but has said that further hikes are not off the table as inflation may continue to exceed acceptable rates. Increases in interest rates can certainly contribute to or precede a recession. In fact, the Bank of Canada has raised interest rates three times to slow inflation since the 1960s and all three times this action led to an economic recession. Current fears of a looming economic depression are also not unique to Canada, as following the COVID-19 pandemic, the global inflation rate increased to 8.73 percent in 2021. This was due to supply chain issues, as well as the effect of the Russia-Ukraine War creating rising food and energy prices, as well as general fiscal instability. A majority of the World Economic Forum’s lead economists agreed earlier this year that we could see the beginning of a global recession starting in 2023, which would certainly affect the Canadian economy. The article also discusses the Canadian economy’s slowed economic growth, as the GDP has stagnated in the second quarter of this year. However, it suggests other factors may explain the decrease, including striking port workers in British Columbia, and the resulting negative effect on economic activity. An RBC report mentions how on a per-person GDP basis, there has already been a decline for four straight quarters despite a surge in population growth, and concludes overall predictions for GDP growth do not look promising despite local factors including Canadian wildfires and strikes. They also point to a 0.5 percent increase in the unemployment rate over the past few months, which has historically tended to indicate a looming recession.

Context The City of Ottawa Mayor, Mark Sutcliff released a statement about a revised plan for the redevelopment of Lansdowne, an urban public park containing historic landmarks and commercial venues. The project includes the demolition of a sports arena complex, stadium stands, and the building of a new event center, residential units, and retail space. Despite suggesting the new plan has addressed the concerns of residents, many issues remain. Analysis The City of Ottawa and the Ottawa Sports and Entertainment Group (OSEG) have been in partnership to develop Lansdowne since 2012 and finished an original redevelopment of the park back in 2014. A few years later in 2019, the financial sustainability of the park came to the city council’s attention, and in 2020 the partnership was extended another 10 years with direction to develop a new plan to revitalize Lansdowne. Consultation with community members started in 2020, with the original concept released last year in 2022, and a revised version released this month. Community feedback was acquired through various platforms including public information sessions, an open email for feedback, and public surveys. A summary report of that feedback was published on October 6th, which highlighted the six most common themes of community residents’ concerns. The first concern was related to the size and number of the multiple high-rise apartments which were designed to exceed 30 floors. In the new plan , they have removed one of the three planned buildings, with fewer total units in each, and only one tower with the potential to be built at 40 stories. Residents were also concerned about the loss of greenspace due to the new event center construction. Many people suggested they wanted that greenspace allocated elsewhere, or alternatively, an accessible greenspace roof on the event center. Although in the original plan the city had conceptualized a greenspace rooftop on the event center, this was scrapped in the new plan as it was deemed too expensive to maintain. Respondents wanted a restriction of vehicles to the premises to promote pedestrian safety, a concern that has existed since Lansdowne was first renovated back in 2014. They also wanted more public transportation infrastructure to and from the park, whether that is the local city buses, trains, or cycling infrastructure to reduce congestion on connecting roads. Relatedly, residents also desired more accessible public use space from washrooms to water fountains to usable and free space for people to occupy. The new plan has reduced the number of parking spaces for the residential buildings to meet the Bylaw limit of 0.4 spaces per unit, down from 739 to 336 spaces, while they added 36 new spaces for the event center. In terms of accessible public space, the new plan includes 27,000 square feet of space originally earmarked for the third residential building, now available for an unspecified “public realm.” Residents also wanted more local and less corporate or big-box businesses, to reflect the unique local community better. The new plan does suggest the amount of retail space has been reduced from 108,000 square feet to 49,000 square feet but does not directly address the desire to attract smaller, local businesses. Finally, there was also a concern about financial transparency of how the project is being funded and the resulting impact on the City. The Federation of Citizens Association (FCA) which represents over 70 community groups voted unanimously to oppose the new plan, which comes with a very costly price tag of $419 million, increased from $332 million of the first plan. They cite that the debt comes at a time when the transit system is facing major issues, and the city is struggling with a housing affordability crisis.