Welcome to my blog on housing, culture, and design in Toronto, Ontario, Canada.
So, we’re back in election season again, and, like two years ago, affordable housing remains a hot button issue for candidates and voters alike.
I wrote about the various party platforms in regards to housing back in 2019 in this post: The Federal Election And The Canadian Housing Market.
During the last Federal election campaign, affordability in general – and in particular, in relation to housing – was most definitely an issue pressing on many voters’ minds – even moreso in cities like Toronto. The dream of homeownership continues to burn for Canadians, but remains just out of reach for many.
Additionally, since the last election, there has been a pandemic-fuelled housing boom across the country with explosive price appreciation in a short period of time. Prices have continued to climb (as have election promises!) alongside the cost of living. Given the continued price appreciation of.. everything, it’s clear that more needs to be done to help Canadians.
Affordability Is Definitely An Issue For Voters
I wrote about the challenges around the affordability crisis for many Toronto dwell-hunters in Dear Urbaneer: Will I Ever Be Able To Afford A Home In Toronto?.
With inflation at a nearly two-decade high, high housing prices are definitely contributing to the high cost of living. In this poll at the beginning of the election, issues around the high cost of living and affordability as the top concern, with 28 percent of respondents placing this at top of the list.
According to this Toronto Star article “Every Party Says It Can Make Life More Affordable For Canadians. Here’s How They Propose To Do It“, one year after the declaration of the pandemic in Canada, housing prices had risen a staggering 31.6 percent higher. Needless to say, that has outpaced income growth, making access to homeownership extremely difficult for those trying to get into the market. It’s not just being able to afford the high prices of housing. With increasing prices, it is harder- and takes longer- for people to amass a down payment.
Supply hasn’t kept up with demand either; this report from Scotiabank shows that Canada has the lowest number of housing units per 1,000 in any G7 country. The report suggests that the fix to the affordability problem in Canada has much to do with the creation of new homes and calls for a national table of federal, provincial, and municipal governments, real-estate developers, investors, and civil society organizations to work together to overcome barriers and obstacles to supply creation.
And for those who are able to own a home, many are leveraged to the max, taking advantage of low-interest rates to borrow more money to pay higher prices. It’s a vicious cycle.
Not to mention that, even when you’re able to pony up, what you can get for your money is steadily eroding in Toronto.
Affordable housing is an important issue, not just for buyers, sellers, or renters, but for the community at large. Housing as a sector is integral to our economy – and to our well-being – socially, physically, and fiscally. When housing isn’t affordable, secondary and local economies are impacted as well. This Toronto Star article, “Shortage Of Affordable Housing For Workers Costs The GTA A ‘Staggering’ $8 Billion Annually” shows that the lack of affordable GTA housing has cost companies $29.4 billion to $37 billion in the areas of productivity, paying wage premiums, recruitment, and turnover when they are unable to retain employees.
The same article says that during the period of 2008 to 2018, Toronto housing costs increased by 115 percent, compared to median income increasing meagrely by 25 percent.
It’s no surprise then, that housing is an issue that is gathering a lot of attention on the campaign trail. Click here to read this National Post article: “Housing Affordability Is Shaping Up To Be A Top Issue In The Election“.
To varying degrees, the parties will try to address the question of housing affordability. They will use a social approach in making available affordable housing to low-income people. They also have to address the issue of making housing- both for rental and for homeowners – across all income levels, which they will develop a strategy around policy affecting supply and demand.
Let’s take a look at the different party platforms around housing, as they have been presented in the media.
*Image courtesy of CP24 – The Canadian Press/Ryan Remiorz, with thanks.
At the outset, the Conservatives seem to have the most aggressive housing strategy. It addresses supply, affordability, and rules around financing and goes into detail about how this will be accomplished.
It’s well-known of course, that it’s the mechanics of supply and demand that drive prices. While the policy has typically favoured the supply side of the equation to try to bring balance to the market (i.e., stress test, down payment requirement, etc.), it has long been held by experts and pundits that it is addressing supply that will aid with affordability. And the policy to support supply has been lacking.
I’ve written a great deal myself about the problems with the lack of supply in a number of past posts Toronto Real Estate, Yellowbelt Zoning & The Missing Middle: Part One – and – Toronto Real Estate, Yellowbelt Zoning & The Missing Middle: Part Two. An ongoing housing squeeze, if you will.
The Conservatives are tackling the issue of supply head-on with their platform. To start, they are pledging to build a million new homes over the next three years. To accomplish this, they will tap into federal infrastructure investments to create housing near transit hubs, working with municipalities.
They plan to release 15 percent of the buildings from the federally owned real estate portfolio to help with supply.
They promise to defer capital gains tax when selling a rental property and buying a new rental property, encouraging investment in rental housing.
They will also work towards remedying the impact of foreign investment and rising housing prices due to lack of supply by implementing a two-year ban on foreign investment in private residences. Instead, they will encourage foreign real estate investment to be directed towards purpose-built housing, which is a vastly underserved segment at the moment.
In the interest of balance, they are also looking at policy on demand to help average folk with homeownership, like encouraging the expansion of the market with 7 to ten-year mortgages, which would increase stability, help with budgeting and also reduce the stress test, which had created more barriers for already challenged homebuyers.
They are also looking at indexing CMHC insurance to specific markets and raising the eligibility for insurance limits, which is helpful for those in pricier markets- simply because of the extreme challenges of saving up for a sizeable down payment in cities where the cost of living is prohibitive- like Toronto.
The economy has changed, and it is important that financing rules change alongside it to reflect the composition of the workforce and to make homeownership more accessible for more people. Gig workers, small business owners, and contractors, which make up a growing proportion of the working public, so the Conservatives are suggesting modifying the stress test so that it doesn’t discriminate against these types of workers, as it does now.
They are also proposing an increase to the Home Accessibility Tax Credit, which will be helpful to seniors wishing to age in place for longer.
*Image courtesy of Reuters, with thanks.
Back in 2017, the Liberals pledged $70 billion over 10 years with goals in mind like cutting homelessness and building 160,000 new homes, with more cash being pledged to these goals in their most recent budget. They also promised to help first-time homebuyers and to levy a tax on foreign buyers to discourage the holding of empty homes, in a bid to get these homes into the supply pool for renting or buying.
According to the Parliamentary Budget Office, a good chunk of these earmarked funds have yet to be spent. Much of their current platform is an extension of these promises, and others were established with the most recent budget last spring.
A little slower out of the gate, and perhaps in realizing how affordability was quickly becoming a major issue for voters, the Liberals released an aggressive housing plan on August 24, about a week behind the other parties.
The measures are largely geared to assist first time homebuyers trying mightily to get into the housing market in the face of rising prices and to defray many of those costs.
To help with supply, over a four-year period, the Liberals plan to build, preserve or repair 1.4 million homes.
Much of the zoning and other decisions to build new housing would reside with provincial and municipal bodies. Acknowledging this, they have pledged $4 million into a housing accelerator fund, intended to help make more urban land available for new construction.
Also on the supply side is $600-million for the conversion of empty office space into housing. They’ve pledged $1 million to support rent-to-own projects.
Multi-generational housing is on the rise in Canada as well, so the Liberals are offering a renovation tax credit to build a secondary suite at home.
They will require CMHC to reduce mortgage insurance rates by 25 per cent, which will offer homeowners significant savings.
To help homeowners save money in order to purchase a home, they are offering First Home Savings Account under which people under 40 can save up to $40,000 toward their first home. They can withdraw it tax-free when they go to buy their home.
The First-Time Home Buyers Tax credit will double, and now be $10,000. This is intended to help with closing costs, making the purchase more affordable.
Also keen to help curb foreign ownership that is restricting supply and contributing to price appreciation, the Liberals plan to ban foreign ownership for two years, in much the same way that the Conservatives are. They would also expand a foreign ownership tax to include unused, vacant land in addition to houses.
They are proposing an anti-flipping tax, which would require home owners to hold on to properties for 12 months or more, or risk incurring substantial costs.
They are also tabling a Home Buyers’ Bill of Rights, intended to bring transparency to the buying process, in reaction to blind bidding wars that have become the norm in many locales across the country, pushing the bounds of affordability. This is interesting, as this type of policy isn’t typically under Federal jurisdiction, but rather managed by the province.
Check out these articles for background Liberals vow new tax-free savings account for first-time home buyers, lower rates on mortgage insurance and Trudeau promises new incentives worth billions and a tax on ‘flipping’ to help Canadians buy a home
*Image courtesy of Nanaimo Bulletin/Nicholas Pescod, with thanks.
Like the Conservatives, the NDP is banking on affordability in housing with a detailed strategy.
New Democrats pledged $14 billion to build 500,000 housing units in the next 10 years, with half of that done within five years.
Foreign buyers would expect to pay a heft 20 percent tax. One time as a deterrent rather than revenue stream This CTV news story has good background on that plan “Singh Promises 20 Percent Tax On Foreign Homebuyers In A Bid For B.C. Votes“.
They would help create supply by waiving the federal portion of GST/HST on the construction of new, affordable rental properties.
Co-ownership is a strategy that many homeowners are adopting now to make homeownership more affordable. They would support this by creating a co-ownership model and by backing these types of mortgages through CMHC.
They would re-introduce 30-year mortgages backed by CMHC, with the intent that they would make payments more affordable for first-time homebuyers as they jump on the property ladder to build equity.
They’d double the Homebuyers Tax Credit in order to help shoulder the cost of buying a home.
Like the Conservatives, they propose creating an ownership registry, aimed at creating transparency and cracking down on money laundering through real estate.
This National Post article “NDP Releases Platform With New Wealth Tax Ahead Of Expected Federal Election Call” talks about their housing plan, and other platform promises.
*Image courtesy of National Post (The Canadian Press/Christopher Reynolds), with thanks.
The Greens would like to tax foreign owners of unoccupied residences, but also tax corporate owners of vacant properties, hoping to generate a revenue stream and encourage more supply into the market.
They would also like to redefine the formula for affordable housing.
They see co-operative housing as a solution to affordable housing, so would like to invest more heavily in that, as well as increase housing benefits and a rental assistance program at the federal-provincial level.
What’s The Path Ahead?
This article “A Housing Crisis Is Costing Canadians Billions. What Are Politicians Going To Do About It?” makes the interesting point that a solution to housing affordability is certainly not one size fits all. A policy that might bring home values down won’t be welcome by current homeowners trying to grow their wealth, but with rising costs and growing numbers of would-be homeowners on the outside looking in, there is indeed a conundrum. And how do you strike the right balance?
The refrain does seem to be that piecemeal policy to address demand – and to some degree supply that has been done to date is a start, but it hasn’t gone far enough. Policy needs to be more comprehensive and involve stakeholders from all levels of government, as well as various members from the marketplace and the communities affected.
This Globe and Mail article Only a big price drop will restore housing affordability. No federal party will acknowledge this is interesting, as it suggests that the true path to affordability comes with a signficant drop in prices, but that making it happen with policy would be drastic- and likely unpopular- so all the parties are extending smaller, less wave-creating policy.
No matter what your political stripes are, there is no question that affordable housing matters. Certainly, it is only one issue among many that might sway your vote, but the first step is getting informed on the issues that matter most to you.
While it may sound trite, the fact remains that the best thing you can possibly do for yourself and your fellow Canadians during this election is.. your research!
This election platform from MacLean’s magazine is a good resource, as it summarized each party’s stance, separated out by issue, so you can compare and contrast. It’s also updated frequently and links back to party platform documents: 2021 Election Platform Guide.
This CBC article is also a good summary: “Federal Parties All Say They’ll Make Housing More Affordable. Here’s What We Know About Their Plans“.
When it comes to voting, please look beyond the smiles, the blanket promises, and the photo-ops with babies and pandas!
We dive further into the election and the housing crisis in our new follow up piece: Affordable Housing Remains At The Forefront Of Federal Election Campaigns
At Urbaneer.com, part of being able to properly advise clients in matters of real estate involves a comprehensive awareness of the entire landscape – from a social, market, and political perspective – because it all matters! Rarely do I go on rants, but here is my post where I wonder aloud Why Homeownership Remains A Priority For Canadians, Despite The High Costs?
With decades of experience and a commitment to combing the media for the most current data, we’re here to help!
Thanks for reading!
~ The Urbaneer Team
Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage – (416) 322-8000
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