Liberals’ housing plan fails to remedy crisis, experts say
No fix for affordability problem seen among Trudeau’s armload of proposals
The Liberals’ sweeping new plan to curb soaring home prices, which includes billions of dollars in new funding and tighter restrictions on foreign buyers, will not be enough to restore affordability in the Canadian real estate market, economists and housing experts say.
At a campaign stop in Hamilton on Tuesday, Liberal Leader Justin Trudeau promised to “unlock home ownership” through a flurry of policies that would clamp down on bidding wars, rampant speculation and vacant properties. The market is afflicted by “instability” that keeps young people from buying property, he told reporters — “If you work hard, if you save, that dream of having your own place should be in
reach. But for too many people, it just isn’t.”
Experts say the plan is a start, but it won’t keep prices from rising.
“The Liberals are doing their homework with this plan, but they’re ultimately dodging the big question: does Canada want our home prices to rise or stall? Because restoring affordability is going to require home prices to stall,” said Paul Kershaw, a professor at the University of British Columbia who founded advocacy group Generation Squeeze.
Housing affordability has long been a head-scratcher for policy-makers. Property costs have risen dramatically over the past decade, even as governments of varying political persuasions have implemented measures aimed at increasing housing supply and reducing demand. Politicians, torn between longterm policy ambitions and popular opinion, have often found themselves balancing the needs of first-time homebuyers seeking affordable starter homes with the financial goals of homeowners — a crucial voter base — who benefit significantly from rising property values.
The market’s increasing exclusivity has been attributed to a seemingly endless list of factors: a dearth of housing supply, municipal zoning deficiencies, foreign buyer activity, financialization and investment opportunities, pent-up demand, lack of political will, skewed demographics and even white-collar crime.
The Liberals committed to building 1.4 million homes within four years
There is no silver bullet to solve the problem, experts generally agree. But Kershaw says it helps to at least frame the problem as one that disproportionately hurts young people. “The deck is stacked against younger Canadians,” he said.
Among a slew of proposals, the Liberals committed to building 1.4 million homes within four years by easing regulations on construction and eliminating some red tape. The party would also double the first-time home buyers’ tax credit from $5,000 to $10,000 as an incentive to help with the closing costs associated with buying property.
Trudeau said he would force the Canada Mortgage and Housing Corporation to slash mortgage insurance rates by 25 per cent, marking $6,100 in savings for the average Canadian. Further, he introduced a savings account where Canadians up to age 40 could place up to $40,000, not subject to income tax, toward their first home and withdraw it when it comes time to buy property.
On the transparency side, Trudeau presented a home buyers’ “bill of rights” that would ban blind bidding and require more disclosure from realtors who represent both the buyer and seller. The bill would also ban foreign buyers from purchasing Canadian homes for the next two years, and introduce an “anti-flipping tax” on residential properties that would require homeowners to pay hefty taxes if they bought and sold their house within 12 months.
David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives, said some of these proposals have the potential to make housing less expensive if implemented properly — while some have the potential to make housing more expensive.
“The doubling of the firsttime home buyers tax credit, as well as the reduction in CMHC mortgage insurance payments are likely to increase prices in the long term, because they’ll allow people more money that will then allow them to take on heavier mortgages,” Macdonald said. “They’ll just bid house prices up higher.”