That yesterday’s Federal Budget takes such a strong stance on housing is highly encouraging, but some of the announced policies are missing the mark: that seems to be the general consensus among real estate industry groups, who have been calling for reforms to alleviate the nation’s real estate supply and affordability crisis.
The 304-page budget included some sweeping measures to temper rampant price growth and boost much-needed supply in the market, including a two-year ban on foreign buyers, taxation for property flippers, and a pledge to spend $10.2B over the next five years to build over 100,000 market-priced and affordable units.
That housing -- and supply creation -- is taking top billing has been applauded by realtors, but questions have arisen over how effective certain “artificial” demand-side measures, such as blocking non-Canadian homebuyers from purchasing property, will truly be.
“Government initiatives intended to artificially suppress demand are aiming at the wrong target. Past demand-focused government actions have clearly not had the desired effect,” stated Toronto Regional Real Estate Board President Kevin Crigger.
“Unfortunately, the federal government appears poised to repeat the same mistake by focusing on banning foreign buyers who continue to be a small slice of the overall market. It is important that governments do the right thing by implementing proven evidence-based measures that deal with the real problems, and not be distracted by what is popular.”
He adds that the ban could also have unintended consequences for overall population growth in the Greater Golden Horseshoe region which doesn’t grow, on net, without immigration.
“Population growth is required to sustain continued economic growth,” he adds.
However, the Board is in favour of policy moves targeting the supply creation process at the municipal level; the $4B Housing Accelerator Fund will aid in the streamlining of housing development and approvals so homes can be brought to market quicker.
“The federal government has the levers to push municipalities into modernizing their exclusionary zoning policies, and should use that leverage. The funding committed for the construction of affordable housing units and for co-op housing will also help in this regard,” continued Crigger.
More Detail Needed on Delivery of Supply
The Residential Construction Council of Ontario (RESCON) concurs that a focus on supply is a welcome development, but raises doubts as to how the proposed measures will actually translate into more homes built.
“The government has indicated it has earmarked $10 billion to help ease the housing crisis but many of the proposals are demand-side measures such as assisting people to save for a down payment,” says RESCON president Richard Lyall. “We have a major housing supply deficit in Canada and there’s a lack of specifics as to how these measures will increase the stock of housing."
Canada ranks 34th out of 35 OECD countries in terms of new housing delivery timelines, and last among G7 countries in terms of unit output.
“As Finance Minister Chrystia Freeland noted, there is no silver bullet to the problem,” says Lyall. “While we’re pleased the government has identified the housing supply crisis and is acting, we need more information as to how these measures are going to accelerate the build of new housing.”
The industry body is encouraged, however, by measures to increase the number of people with construction skills arriving in Canada, an essential development to replenish a rapidly depleting workforce. A $29.3M Trusted Employer Model will streamline the hiring process for employers who’ve used the Temporary Foreign Worker Program, and have credibly employment and work standards. An additional $84.2M will be spent over four years to fund the Union Training and Innovation Program, an apprentice-matching initiative.
According to RESCON, more than 92,000 construction workers are set to retire by 2030 in Ontario, meaning the industry will need to hire, train, and retain more than 100,000 within the decade.
“It is critical that we get more youth, women and people from BIPOC communities into the trades,” says RESCON VP Andrew Pariser. “We face a shortage of some trades if we don’t get more people into training. There’s especially a need for people with specialized skill sets in the residential construction industry.”
How Will the Housing Market React?
Meanwhile, an economist at one of Canada’s largest lenders is anticipating the market will adopt a “more cautious stance in the wake of Budget 2022” as buyers and sellers digest the new developments.
“... we think the breadth of measures announced in this budget will make a big impression on the market. Large housing packages introduced by British Columbia in 2016 and Ontario in 2017 caused market participants to pause (briefly) while assessing implications. Minister Freeland’s housing budget has the potential to do the same,” writes Robert Hogue, Senior Economist at RBC.
“The suite of federal measures comes a week after Ontario and Nova Scotia announced new or expanded taxes on foreign buyers, and less than a week before the Bank of Canada is widely anticipated to hike its policy interest rate by a hefty 50 basis points -- and in our opinion a further 100 basis points by year-end. The latter represents a significant shift in a factor that’s been a strong tailwind for housing demand. Add upcoming municipal policy action into the mix -- Toronto and Ottawa are eying empty-home taxes -- and the landscape is looking less favourable for the market. We believe this will cool the high temperature of the market down by several degrees.”