Posthaste: Canada's housing obsession feeding into productivity slump, report says

financialpost.com:

Canada’s poor productivity is the result of a lack of investment in business and technology while investment in housing has soared, says a new report from the Fraser Institute.

The think tank’s report, which compares investment in Canada and the United States, found that over the past two decades capital investment in Canada was greater than in the U.S. “relative to the size of the economy.”

However, the report’s author attributes this mostly to the “enormous investments made in housing in Canada versus the U.S.” From 2014 to 2021, housing accounted for 34.1 per cent of total investment in Canada, versus 18.5 per cent for our neighbour to the south.

Meanwhile, U.S. investment in areas considered to boost productivity dwarfed that of Canada’s during the same time period.

For example, total investment in IT was 10.4 per cent in Canada and 16.5 per cent in the U.S. Investment in research and development and other intellectual products represented 27.7 per cent of total investment compared with 12.6 per cent in Canada.

“Weak business investment in technologies like IT and research and development — which help Canadian workers be more productive — impedes improvements in Canadian living standards,” said Steven Globerman, senior fellow at the Fraser Institute and author of the report.

It might seem counterintuitive that the Fraser Institute is worried about housing investment, given that the country is in the midst of a full-blown housing shortage and affordability crisis.

Globerman doesn’t say there is too much housing investment.

“Canada clearly does need more investment in residential housing, but policies need to be put in place to encourage more domestic savings to finance increased business investment as well,