Like an American president in his final days at the White House, Stephen Poloz plans to leave a note in his desk drawer for the next Bank of Canada governor — just as his predecessor did for him.

He says it will be about the need to surround yourself with smart, critical thinkers who will challenge your views so that you don’t overlook a good idea.

And in his own way, Poloz is already issuing a more public goodbye letter for Canada in advance of his departure in June, downloading some of his own ideas so that they aren’t overlooked in the heat of the moment.

He has written a couple of policy papers on the role of artificial intelligence in the economy, and built up a unit within the central bank devoted to grappling with climate change.

And in an interview with the Toronto Star this week, he is spelling out some thoughts on how to deal with the high cost of housing — that seemingly-intractable problem that weighs on so many people living in southern Ontario and the Vancouver area.

His solution? Shared equity.

It’s a concept that the federal government has already flirted with in its First Time Home Buyers Initiative that sees Ottawa buy up to 10 per cent of a new home so that first-timers can more easily scrounge up a down-payment.

Poloz sees the concept going much further than that, and led by the private sector — banks, not government.

Here’s how it works: If a prospective homebuyer wants a home for $1 million but can only realistically afford to carry a mortgage on $500,000, then an investor of some kind could be found to buy the other half of the home.

The homebuyer would live in the entire house, but only pay the mortgage on half of it. The investor who finances the other half would receive a rent-like fee for the housing services the homebuyer uses, and also pocket half the capital gains or losses in the home’s value.

“That’s complicated but that’s a solution to the affordability issue,” Poloz argues. “I’m thinking of it that way because it kind of gives me a clue of the sorts of things we could try to do to at least begin to address the affordability problem. We will not address it by wishing it away, or somehow building more houses.”

As real estate prices soared over the past few years and household debt piled up, policy-makers have tried a range of measures to take some of the heat out of the housing market and help affordability. Regulators have imposed a stress test on borrowers so they don’t get in over their heads. Governments have cracked down on foreign buyers. And there are a range of federal and provincial incentives and subsidies to build more homes, increasing the supply.

Taken together, the measures appear to have calmed down the speculation that had been notable in big cities. But as any big-city politician who went door to door during last fall’s federal election campaign would say, housing is very often still unaffordable.

The shared-equity idea is not a new one, but it’s certainly not pervasive in Canada. Poloz was inspired by House of Debt, a 2014 book by Atif Mian and Amir Sufi about how the great recession of 2009 was driven by the indebtedness of American households. In the book, the authors urge a rethink in how mortgage risks are shared between homeowners and their banks, arguing that homeowners shoulder too much of the burden.

Poloz spoke briefly once last spring about their book, pointing out a need for banks and financial services in Canada to think more creatively about risk sharing and mortgages.

But even the federal government’s relatively timid foray into the world of shared equity has met with criticism.

Experts and policy-makers alike have said that the main reason homes are unaffordable in big cities is because there are not enough of them to go around and meet the demands of burgeoning urban populations. In other words, supply is the problem; not demand. And anything that encourages demand, including shared equity schemes, makes the supply problem worse.

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Regardless, the deeply-rooted traditional approaches of Canadians and their financial institutions toward home ownership will have to adjust, Poloz says. The idea that success means buying a home, paying down its mortgage and using it as a nest egg and retirement income supplement is not compatible with high debt levels.

Like the people he surrounds himself with do to him, Poloz is asking borrowers and lenders alike to think more critically and openly about how we can all afford a decent roof over our heads.

As for that letter in the desk drawer from his predecessor, the high-profile and at-times-provocative Mark Carney? Poloz won’t say what kind of advice it contained — except to add with a twinkle in his eye that he’s followed every piece of it.

Canada’s top banker on climate change, consumer confidence and what comes next

Stephen Poloz sat down with the Toronto Star this week to discuss his seven-year term as the governor of the Bank of Canada which comes to a close this June. Here’s are excerpts from the interview:

On why companies need to come clean on climate change

“When we’re talking about …trying to promote among companies more transparency around what their carbon footprint is, and what their plans are, and so on, what that will allow is for investors like (BlackRock CEO) Larry Fink to be able to decide what share of his plans’ portfolios should be represented by companies that are emitting high levels of carbon, or gradually reducing them or whatever. Without that transparency, you get this gap in knowledge and you can have sudden movements, which could be quite painful and disruptive. With transparency, I think you help ensure that it will be a clear and gradual process for investors. It doesn’t have a cliff in it.”

On why consumer confidence deteriorated at the end of the year

“2019, it turns out, the economy was in an even stronger place than we thought…So we should be less surprised that when you shock it with something like the trade war washing ashore and causing unemployment to rise in manufacturing and certain sectors of the economy, and you see your neighbour get laid off, (and then) you see around October, November, December…consumer confidence goes down. So I say OK, if the world has now firmed up and we expect it to grow a little bit faster over the next two years, then that’s as bad as that gets. That fuels the interpretation of it being a temporary thing. It’s one more way I think we’re going to show our resilience. But we have to be prepared in case it is more profound.”

On what he will do once he finishes his term at the bank

“It’s kind of unfair to ask me that at this stage because I’m not really allowed to make plans…We were really careful not to use the ‘retirement’ word and I’m not ready to retire. So I’ll be looking for something different to do. We’ll see what pops up. There’s no rush. I’ve got a lot to do between now and June.”

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