Marc Lee: What the parties are promising to make housing more affordable
Credit to Author: Stephen Snelgrove| Date: Mon, 30 Sep 2019 01:00:49 +0000
Across the country, lack of affordable housing is top of mind for many Canadians.
The increase in housing prices has pushed home ownership out of reach for many. And, the combination of households staying longer in rental housing — and little new rental housing being built — has led to low vacancy rates and high rents. The tip of this iceberg is the rampant homelessness on the streets of our major cities, including Vancouver.
Almost two years ago, the federal government released a new National Housing Strategy, however, much of the commitment is for loans not grants spread over 10 years and back-end loaded, meaning most of the money is spent at the end of the 10 years. The Parliamentary Budget Officer notes that when compared to past federal funding levels, this strategy barely moves the needle.
So what are the parties promising?
At the peak of the real estate frenzy the federal government introduced mortgage stress tests to prevent households from becoming over-leveraged. The stress tests require that a borrower can make payments if interest rates rise by two percentage points.
The Conservative party proposal to eliminate the mortgage stress test means some households could have a heftier mortgage and increased vulnerability. The Conservatives and NDP would allow for longer 30-year mortgage terms, leading to lower monthly payments but increase household debt.
This would not improve housing affordability and could further inflate the market. With record levels of household debt in Canada, it’s hard to see the wisdom of pushing households to assume bigger mortgages.
The federal government introduced the First-Time Home Buyer Incentive program in the 2019 budget, which provides an interest-free loan of up to 10 per cent of a new home or up to five per cent of a resale home. The government assumes a share of the mortgage to be repaid upon sale of the home. Program limits are a maximum $500,000 mortgage and household income up to $120,000.
The Liberals would increase the program to better work in expensive markets like Vancouver and Toronto with the maximum mortgage rising to $800,000 and maximum income rising to $150,000.
In contrast, the Greens would eliminate the program entirely.
The Liberals have proposed a speculation tax similar to the B.C. NDP government for foreign owners and “satellite families,” whose principal breadwinner works outside Canada and little income is declared in B.C. The Liberals propose a national version with a one per cent tax rate applied to properties owned by non-resident, non-Canadians. It is not clear how this would work since property tax is provincial jurisdiction.
The NDP has also promised a 15 per cent foreign buyers tax.
Missing from the National Housing Strategy is major investment in new, dedicated affordable housing. Non-market rental housing, in particular, is badly needed for vulnerable populations including people who are homeless, low-income working families, people with disabilities and seniors on fixed incomes.
From the 1950s to the 1980s, the federal government played a major role building affordable housing in partnership with the provinces, municipalities and non-profits. After a generation of neglect, it’s time to build the affordable housing we need.
The Green Party and NDP have committed to supporting new affordable housing at levels of 25,000 units and 50,000 units per year respectively. Both parties also support co-ops and non-market housing and would remove the GST on new affordable housing, which would shift the incentives for developers towards rental housing construction over building condos.
Retrofitting existing housing is also important and can include energy efficiency upgrades to reduce a home’s carbon footprint. The Green Party calls for 15,000 units per year to be retrofitted while the NDP platform includes retrofitting all housing stock by 2050.
Marc Lee is a senior economist with the Canadian Centre for Policy Alternatives, B.C. Office.
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