“We Need Duct Tape, But Instead We Got Cheesecloth”: Fed Budget Gets Mixed Response in B.C.
A day after the federal budget committed $10B toward the housing affordability crisis, only those in B.C.’s non-profit housing sphere seem pleased, and even then, they are cautiously optimistic.
Andy Yan, Director of Simon Fraser University’s City Program, said the federal government is trying to address supply, demand and finance, but he questions to what effect.
“You see them pushing those levers, and it’s a question of whether they are pushed hard enough,” said Yan.
Demand-Side Policies May Miss Mark
On the demand-side, the government introduced its long-promised two-year ban on foreign buying. In terms of financing, they’ve committed to a new tax-free savings account that would give first-time buyers the opportunity to save up to $40,000 towards a down payment. And on the supply front, $4B of the $10B budget is allocated for a new “housing accelerator fund” designed to expedite development of new housing by slashing red tape at the municipal level. The goal is an additional 100,000 new housing units over the next five years.
Yan wonders if the government considered all the infrastructure necessary when it devised the accelerator fund to push new projects through the pipeline. The investment of housing and infrastructure, he says, should go hand in hand. And regarding the ban on foreign buying, he believes they’ve missed the mark.
“The overall issue has never been foreign buyers — it’s been foreign capital. In this case it’s a policy through which we need duct tape but instead we got cheesecloth.
“It’s very porous in that the policy exempts students who we know from the B.C. experience are a conduit of foreign capital… It’s foreign students, foreign workers and permanent residents who are exempted. The bigger issue is foreign capital in Canadian real estate, and that hasn’t been addressed.”
In 2018, B.C. introduced a 20% foreign buyer tax in certain jurisdictions. The province also introduced a speculation and vacancy tax, which requires all B.C. residents to declare whether they declare less than 50% of their income in Canada. It also requires residents to declare if they are living in their homes for at least six months. Homes that are tenanted are exempt. The consensus among housing experts is that the combination of those taxes helped cool the market, curbing foreign capital speculation and also forcing foreign and domestic investors to bring empty units back online.
“In B.C., we said, ‘if you are going to park money into B.C. real estate, there is no free parking,” says Yan. “Remember, this is largely around transactions. It’s about the flow of money, capturing revenues at the point of the [real estate] transaction as opposed to those already holding [the property].”
Canada’s “Best Kept Housing Secret”
For those in the business of providing affordable non-profit housing, however, it was a day to cautiously celebrate. So far, the federal government’s national housing strategy had largely under-served the struggling non-profits in B.C., with scant funding for desperately needed projects.
Thom Armstrong, Chief Executive Officer of the Co-operative Housing Federation of B.C. said he’d already heard from the Canada Mortgage and Housing Corporation (CMHC) about the new co-op program that would build 6,000 new co-op homes across the country.
The program wouldn’t tap new money, but would rather reallocate $500M from the Co-Investment Fund and $1B from the Rental Construction Finance Initiative (RCFI), said Armstrong. So far only private rental developers had been accessing the RCFI, a loan program with highly favourable interest rates and long amortizations. Access to the programs for co-op housing could be a game changer for a struggling sector of non-profit housing. Armstrong is hoping B.C. sees at least 15% of the funding.
He says that co-op housing is often called “the best kept housing secret” in Canada.
Non-profit co-ops are independent organizations built using grant money and are run by an elected board of directors who govern operations. Members own the building as a group, and therefore have security of tenure and pay a monthly housing charge that is lower than market rate. About 20 to 40% of units are based on rent-geared-to income, according to Armstrong.
The last federal co-op housing program ended back in 1992. After a 20-year run, the feds helped supply more than 90,000 co-op homes for about 250,000 Canadians. In B.C., 270 non-profit co-op buildings and 15,000 co-op homes were built, and all but a small handful developed under the federal government programs.
“So this is a resurgence, and it’s fair to say the co-op federation has been waiting 30 years to hear these words,” said Armstrong. “It’s great news, I have to say, but we really do need to work closely with the CMHC on the details.
“We are very pleased, but we are cautiously optimistic, too, that the program design will enable those homes to be built in every type of market, including Metro Vancouver and the rest of B.C.”
Budget Leaves Out Impact of Big Rental Investors
However, the budget does not address the elephant in the room, which is the role of institutional investors in the rental market. Those big money investors are purchasing affordable housing units at such a rate that the non-profits can’t possibly keep up with the necessary supply, said Armstrong.
He and other housing advocates have been lobbying the government to develop an acquisition fund that takes private rental housing and moves it into the community housing sector, to no avail.
“The federal budget says nothing about acquisitions. It says it will study the financialization of the housing market, but the evidence is pretty much in,” said Armstrong.
“This budget is heavily focused on supply, and I’m all over that. But we’ve been saying for a couple of years that the thing we’ve all missed, as we roll out these new homes…so much of the existing affordable stock, purpose built rental homes… they’re getting gobbled up by real estate investment trusts.
“We are going to get every single promised unit into the ground, and we will still be behind in net affordable homes because for every one we add we are losing three.”