Post-Election, At Least We Can Now All Agree There IS a Housing Crisis
Following Monday’s election, the Liberals enter their third term with the expectation that they’ll need to make good on a long list of housing promises.
Prime Minister Justin Trudeau campaigned on a platform that would make it easier for first-time homeowners to get into the market, including a new savings account, a reduction in mortgage insurance, and tax credits. There were policies that took aim at the demand side, such as a tax on foreign homeowners who live offshore, and policies that addressed the lack of supply, such as the $4 billion promised to fund cities in order to achieve their housing goals.
“This was the first election I think where across the board it was understood that Canada is in a housing crisis, and that was new to me — and I thought that was excellent, because we are,” says Leilani Farha, lawyer, global director of Ottawa-based housing initiative The Shift, and former United Nations special rapporteur on adequate housing. “I might date it back further than they would, but nevertheless, it was agreed on by all parties.”
The most interesting promise came from the Liberals, says Farha, and involved a promise to review a tax regime that not only supports, but encourages, the financialization of housing. Ms. Farha is an advocate of housing as a human right. She has long argued that housing is too often seen as an investment vehicle to be bought and sold like a commodity, driving up prices and marginalizing lower income groups. Better than the other parties, she says the Liberals understood the importance of addressing the financial side of the housing crisis. For example, the party promised to review the preferential tax treatment of real estate investment trusts (REITs).
“I think that unless whoever governs understands how integrated this [crisis] is with finance we will never solve the housing crisis… They said, ‘let’s review our tax regime and see what it is that is creating an atmosphere that is contributing to this housing crisis,’ and that gets at the structural cause of the crisis.
“The Liberals took what you might call a scattergun approach, which some people critiqued, but it suggests that they understand that this is a multi-pronged problem,” Farha added.
She saw other interesting ideas in the party platforms, such as the Conservatives’ promise to use federally owned land to address the housing crisis. They also declared a plan to build one million units of housing.
“I think the Conservatives tapped into a boldness that was required. Whether they could have pulled off what they were suggesting is another thing. But the one million units in three years, to me, that speaks to how dramatic the situation is in Canada. I liked that they were harnessing federal land and properties. It suggests we’ve got to harness what’s already out there, and not just create new stock.”
The NDP similarly understood the pressing nature of the problem, promising 500,000 affordable units over the next decade, although they didn’t give details on what affordable meant. And she was impressed with the Greens’ suggestion that a federal housing minister was required, someone with the expertise to handle a crisis.
Rob McLister, mortgage editor for Ratesdotca Group, doesn’t expect the government to meet all the promises it made in the last month on the housing file. But he too was encouraged to see that, importantly, the election showed a collective acknowledgement of a housing crisis.
“They’ve given us a cornucopia of ideas. Right now they are just ideas. I don’t expect the majority of these ideas to be implemented by the end of their term,” he said.
“I think the most important outcome in terms of housing policy is we now have unanimous agreement from politicians on all sides of the aisle that we have a serious housing crisis, and not just a problem.
“Now, there is finally enough consensus that something needs to be done. So hopefully it depoliticizes the process enough that we can get new policies that incentivize supply, which is the most critical strategy to tackle the crisis.”
Of all the platform promises, the easiest for the Liberals to deliver is increasing the home value limit of mortgage default insurance to more than $1 million. McLister welcomes that change and says that the limit hasn’t been increased since 2012. It needs to go higher so that low-risk borrowers who don’t have the 20% down payment can get into the pricey Vancouver and Toronto markets.
On the other hand, he’s against the Liberals’ idea to decrease mortgage insurance premiums, because that would imply they were set too high, and would indicate a lack of oversight by government. As well, the premiums are necessary to protect those at the most risk of defaulting.
He says it doesn’t make sense to make it cheaper for the riskiest of borrowers to qualify for a mortgage. Access to credit doesn’t solve the problem of overvaluation of housing.
The Liberals promised $125 million per year in tax incentives to boost the number of rental units, as well as a promise to preserve, build or repair 1.4 million homes in the next four years. McLister gave added supply a thumbs-up because he believes the affordability crisis is a shortage-of-housing crisis.
“I think they need to be making sure all the gears in the machine are working efficiently so builders can build homes quickly.”
As well, he argues that a tax on foreign owners living outside Canada, a temporary ban on foreign ownership and an anti-flipping tax — requiring properties to be held for at least a year — are more politically motivated voter enticements than remedies to high prices. He welcomes the promise to end blind bidding because a transparent process could potentially depress prices, although he’s not sure how the federal government would implement the ban.
As for the Liberal promise to bring in a tax-free First Home Savings Account, for those under 40 to save up to $40,000 for their first home purchase, he doesn’t see a lot of uptake because Canadians can’t afford to save much.
“If they really want to help Canadians, reduce the tax burden, or find a way to improve the employment market so people can be paid more, and help people to become less over leveraged.”