OTTAWA — Tillsonburg, a small town between London and Hamilton in southwestern Ontario, has been flooded with so many new people that Mayor Stephen Molnar says it’s a decade ahead of its growth projections, and is racing to build new housing for all the people who want to live there.

“The growth has happened consistently and exponentially over the last three to five years,” Molnar said. “It’s bringing a younger, on-average pre-retirement demographic, because people are able to work from home. If they’re from the Golden Horseshoe or Toronto, they still may be able to get into their place of work or business on a weekly basis.”

Five years ago, the census counted just under 16,000 people in Molnar’s town. Now, he said, it has about 18,000. Housing sales there dipped in July, according to the local real estate board, but the average price of a home topped $600,000, an increase of nearly 24 per cent from the year before. In the last five years, prices have risen 107 per cent.

The COVID-19 pandemic has accelerated a shift that was already underway, with more people than ever able to work remotely, and live in places like Tillsonburg. But that means Canada’s housing affordability crisis has spread from urban centres to smaller cities and towns. For Canadian tech leaders trying to recruit and retain talent, the cost of housing is an increasingly urgent problem—and that’s helped make it a big issue in the federal election campaign.

Ross Wainwright, the Toronto-based CEO of a company called Alida, told The Logic the cost of housing is a factor in its decision to let nearly all its 250 or so Canadian employees work hybrid schedules indefinitely.

Alida, which sells customer-relationship software in fields from retail to health care, can’t provide inexpensive housing near its Canadian offices on Toronto’s Bloor Street or Vancouver’s Granville Street. But it can be loose about when, and even whether, employees come into those offices.

“Because it’s a super-frothy market—you know, any tech, solid engineer or salesperson or customer-support person could do four different things. We’ve got to meet the employees where they are,” he said.

“We had many employees that left a 400- or 500-square-foot condo in downtown Toronto and now live in Pickering or Ajax or Tillsonburg, or other parts of Ontario.”

“If anybody thinks of Tillsonburg, it’s probably the Stompin’ Tom song, just thinking about tobacco fields and nothing. It’s been one of the hottest housing markets in Canada over the last few years,” said Mike Moffatt, an assistant professor of business at Western University who has been warning about the consequences of soaring housing prices.

Moffat is also senior director of policy and innovation at the University of Ottawa-based Smart Prosperity Institute (and a one-time advisor to the federal Liberals). He said aside from making it tougher for employers to hire talent, high housing costs make would-be entrepreneurs less willing to take risks.

“When you start a company, you recognize that, ‘OK, we’re going to earn next to nothing for a year or two.’ So you want to be able to live as cheaply as possible. And it’s hard to do that now in Toronto or Kitchener-Waterloo,” he said.

The basic problem is not complex: when high demand meets low supply, prices go up.

Moffatt said pro-tech policies are one force behind that mismatch. Federal governments have not just set high immigration targets, they’ve specifically made it easier for international students to stay in Canada after graduation

“We’ve had a lot of really talented 20-somethings come to Ontario, which is very good, and in fact, very, very good for the tech industry. The problem is that we didn’t really change the rate at which we built homes,” Moffatt said.

Then came the pandemic, which has been devastating for people in jobs dealing directly with the public, but much less so for white-collar workers. Tech companies that make money disrupting face-to-face interactions have blossomed.

“A lot of teams that were, let’s say, Toronto- or Montreal- or Vancouver-centric, are now disaggregating into other parts of the country,” said Benjamin Bergen, executive director of the Council of Canadian Innovators.

He added that Canadians individually have benefited from a trend toward “near-shoring” in the United States.

“A lot of companies are coming from the U.S. and wanting to hire Canadian talent, and often giving them a global price, not a local price,” Bergen said. “So as an example, if you’re an engineer in Kitchener-Waterloo, you’re now able to, probably, get between 30 and 40 per cent higher of a salary than you were previously.”

That increase in salary demands tracks closely with what Wainwright has found at Alida.

“So how does that impact me? Well, it means that I can hire fewer people. I have to spend more of my budget dollars to secure a really critical hire. And I might have to walk away from some top talent,” he said.

For the housing market, it means some people have a lot more money to spend. Great if you’re one of them, or selling them houses. Not great if you aren’t one of them and competing with them for housing.

The federal government’s authority over housing is limited: local governments handle the zoning that determines where houses and apartments and condos can be built.

But the Conservatives’ platform says they would tie federal funding for transit projects to municipal moves to increase housing density around stations, one measure aimed at getting a million homes built over three years.

(Data from the Canada Mortgage and Housing Corporation show about 208,700 housing starts across the country in 2019 and 217,800 in 2020. In the second quarter of 2021, the annual rate was about 281,900. So the Tory target is to increase the rate of construction by about 18 to 60 per cent, depending which of those years you consider normal.)

The Conservatives also say they would look to sell 15 per cent of the federal government’s real estate holdings for housing, and bar sales of homes for at least two years to non-citizens and non-residents with no plans to move to Canada.

The New Democrats say they would get 500,000 rental units built over 10 years, with measures such as faster funding for co-ops and social housing and waiving federal sales tax on new units, as part of “the right mix of effective measures.”

For buyers, they would increase the tax credit for first-time purchasers (and turn it into an immediate rebate rather than a credit applied at income-tax time) and allow the CMHC to insure longer mortgages, reducing monthly payments. Tuesday, Singh added to the list a hike on capital-gains taxes for property-flippers.

Like the Tories, the NDP say they would tie transit funding to permitting more dense development around stations.

The Liberals’ big-ticket item is a $4-billion fund to help cities speed up housing approvals, aimed at building 100,000 units above the recent baseline over four years. They offer a raft of benefits and tax tweaks (such as a new tax-free savings account) to help buyers, as well.

And they’re pledging $2.7 billion over four years to help social-housing providers repair units—which isn’t very politically sexy, but is meant to address the increasingly decrepit state of much affordable housing now.

All the major parties want to make it tougher for foreign citizens who don’t live in Canada to buy property here.

Moffatt said the critical thing is to get more homes built, so he favours moves like encouraging transit-oriented development over pumping more money into buyers’ accounts.

“If you’ve got three bidders all bidding on the same house, yes, you can do things like first-time-homebuyer credits to help the the first-time homebuyer relative to the other two, but ultimately, at the end of the day, one bidder is going to win this, and two are going to walk away unhappy,” he said.

In Tillsonburg, Molnar said for his community to thrive, it has to keep up with demand.

“You need a safe, warm, secure place to put your head at night. And you can be a young couple with a child and earning a decent income and still not have the capacity to do that in many municipalities.”