We are now at the midway point of the Federal election campaign, and affordable housing continues to be a major talking point. This particular platform is also receiving a lot of press- and encouraging different discussions on the viability of some of the party promises, and what solutions to the affordability crisis are really needed. As such, I decided to write an updated companion piece to my recent ‘What Toronto Real Estate Buyers & Sellers Should Watch For In The 2021 Federal Election’, where I summarize each party’s position on housing.
Concern around affordable housing is significant- particularly in the GTA. This Nanos poll showed that affordable housing is the top issue on GTA voters’ minds, even more important to them than COVID-19, which is significant as we sit on the cusp of the fourth wave heading into the fall. 40.8 per cent of respondents picked affordable housing as their top issue, far ahead of transit (17.5 per cent) and COVID-19 (13.8 per cent).
In regards to the result of the above poll, pollster Nik Nanos is quoted in the CP article as saying, “To hit 41 per cent for any issue is quite significant…. “It speaks to the fact that this is gripping people in the GTA.”
It’s not just the Canadian news cycle that is focused on the housing conversation. The role that affordable housing is playing in the election is getting international attention, with stories about the plight of Canada’s high-priced housing markets and the pivotal role that they are playing on the campaign trail. The article “Major US Publications Focus On Housing Issues In Canadian Election” tells of stories that ran in the Wall Street Journal and Business Insider (including their Australian and South African issues), highlighting the issue.
While many Canadians welcome the fact that housing has each party’s attention, some feel that the platform promises are either unreasonable, need some tweaking or that they miss the mark.
On The Question Of Foreign Investment
Both the Liberal and Conservative parties have pledge to tackle head on the question of foreign investment head on by placing a two-year ban on foreign ownership of real estate. The idea is that a ban would help with supply, by freeing up properties. The Conservatives instead are encouraging foreign investment in purpose-built housing to help with supply in the rental pool. Foreign ownership represents a minor proportion of ownership.
This article “Foreign Buyer Plan Reeks Of Uninformed Politics”, presents a Q & A with Michael Ferreira, managing principal of Urban Analytics, who questions the validity and relevance of these proposed policies against foreign investment. This is a must read! To start, Ferreira questions the data around foreign ownership. He points out that most homes, particularly in Toronto, are owned by local owners, so the impact of banning foreign ownership would be negligible. This is evidenced by the surge in housing prices during the pandemic, when borders have been closed and buyers have mostly been local. He also draws to light the ambitious immigration targets that are set for the next three years and the wisdom of restricting foreign ownership during the same time period. In theory, these immigrants arriving during this time period wouldn’t be able to purchase real estate- and there is a shortage of rental stock as it is, to accommodate demand. Prices would continue to climb in response.
The Liberals had also proposed a tax on foreign-owned land, which will ultimately result in the delay of the creation of new supply. Meanwhile, the consensus among many in that the true issue behind unaffordable housing is lack of supply – so you can imagine the lash back.
Ferreira suggest that the parties’ policies are too demand based, and more needs to be done to address creation of more supply- in particular rental stock- across all price points. And he’s got an easy solution- remove GST from construction of new rental apartment developments, which is something that the industry has been pursuing for years.
Similarly, an article from the Globe and Mail – “Liberal Housing Pledge: What Makes No Sense, What Makes Good Sense And What Canadians Really Need” – refutes the wisdom of banning foreign investment suggesting that it’s a policy meant to pander to voters. They also question the usefulness of creating a TFSA for homebuyers, or giving them the option to borrow down payments. The issue is that down payments are so substantial, because the cost of housing is so substantial- that it takes a very long time just to save. And in the end, home buyers are having to leverage themselves heavily just to purchase, so why would taking on more debt-for the down payment be effective to reduce debt vulnerability?
Dealing With Bidding Wars
This article suggests that Liberal’s proposed the Homeowners Bill of rights is a good plan because it will help create transparency. It could also quell bidding wars and slow overvaluations. TRREB issued a release around this same issue, saying that while they welcome the attention from Federal parties on housing and affordability, they point out the importance of the rights of consumers to privacy and choice – and that those should be the driver behind shaping policy. Here’s a Globe and Mail article, entitled, “Liberals Pledge To Ban Blind Bidding As Home Prices Soar“.
Lack of Supply is Major Cause of High Housing Prices
While there is consensus that some of these policies will be useful in implementing control in the demand side of the equation, the real issue around affordability lies in supply, which has long been a problem in Toronto- and has now expanded out across most of the country, pushed by pandemic housing boom.
The most current stats from TREEB, showed a marked price increase of over 12 per cent, year-over-year, driven by a dire lack of supply. In fact, new listings plunged a remarkable 43 per cent, year-over-year, which is the lowest level seen in a decade.
You’ll want to read this Toronto Star article, entitled, “Toronto Area Home Prices Shoot Up By Another 13% As New Listings Suddenly Plunge“. Additionally, “New Homes Set Record In July With Prices For Single Family Homes Up Almost 30%” shows how the benchmark prices are climbing rapidly in Toronto, with a scarcity of land and supply shrinking in the face of demand.
Clearly, the supply side of the housing affordability question needs to be addressed – and quickly!!
The Canadian Real Estate Association welcomes the federal parties’ attention on making housing more affordable, and suggest three specific ways in which to accomplish that goal, as they outlined in this release.
First, they would like to boost supply by cutting through red tape, adding housing clauses in Infrastructure Bilateral Agreements between Infrastructure Canada and provincial and territorial partners. Second, they would like to see affordable housing set as a national priority, with a multi-stakeholder approach, with representation from all levels of government, real estate professionals, builders and developers to create a permanent National Housing Roundtable to identify obstacles to creating housing supply- and develop solutions that work. Third, from the borrowing side, they would like to see a 30-year amortization and increasing the withdrawal limit for the Home Buyer’s Plan to reduce debt- and more affordable mortgage payments.
In this release, the Ontario Real Estate Association welcomes the fact that housing affordability is getting such focus from the parties, particularly the plans from the Conservatives and Liberals to re-purpose federally owned real estate. They also like the Conservative’s plan to centre development along transit lines, which they feel will help to support transit infrastructure. They think that the Liberal’s multi-generational tax credit could help create supply by streamlining some of the red tape around the creation of secondary suites in Ontario. They welcome the NDP’s plan to waive the GST/HST on affordable rental housing as they feel that it will give young families a leg up to get into affordable housing.
This release by the BC Real Estate Associate says that – while it is great that the Conservatives and Liberals both have promises in their platforms to create more housing supply, without specific plans in place, like a Federal Housing Strategy that supports municipalities to speed up approvals, it will be hard to actually create that supply. BC like Ontario, faces a massive shortage in housing and incredibly expensive housing markets.
So how does this affect your future as a homeowner? It’s something to keep in mind when you vote.
For more reading on the election and the various housing platforms, check out these articles: “Curb Appeal: How The Parties’ Housing Promises Stack Up, Reality Check: How Credible Are The Election Promises On Housing?” and “How Federal Parties Plan To Fix Housing Crisis After Years Of Failed Policies” .
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