We don’t often get into politics...or at least we try not to get into politics. But with the Federal election right around the corner with each party making big promises about real estate and housing—things that we and our clients care deeply about—we like to put our thoughts in the ring.
We’ll get to our thoughts in a second, but here’s a quick overview of the top 3 main political parties and their proposed housing strategies.
Liberal Housing Strategy
For the 2021 election, the Liberals are promising the following:
To build, preserve or repair 1.4 million homes in four years,
Double the first-time homebuyers tax credit from $5,000 to $10,000,
Have the Canada Mortgage and Housing Corporation (CMHC) to cut mortgage insurance rates by 25%,
Have $1 billion dedicated in funding for a rent-to-own program,
A Home Buyers’ Bill of Rights to ban blind bidding,
And a first home savings account to allow Canadians up to age 40 to save up to $40,000 for their first home and withdraw it tax-free when it’s time to buy.
In addition to these promises, they also want to ban foreign ownership of new homes for the next two years.
The Liberals introduced a 10-year, $40-billion National Housing Strategy in 2017 to build 100,000 affordable housing units and cut homelessness. The spring budget included $2.5 billion to create 35,000 affordable housing units.
Conservative Housing Strategy
In this election, the Conservatives have promised:
To build one million homes over three years,
Launch an Indigenous housing strategy,
Convert 15% of federal government property into housing.
Ban foreign investors not living in or moving to Canada from buying homes in Canada for a two-year period.
The Conservatives also would like to look at seven-to-10-year mortgages and tweak the stress test, such as removing the test for people who want to renew their mortgage with another lender, and change insurance requirements to help more Canadians qualify for financing.
New Democrat Housing Strategy
And finally, here’s what the NDP is promising:
Building 500,000 affordable homes over the next decade
The creation of 30-year mortgages insured by CMHC.
A 20% foreign buyer’s tax on purchases of residential property to foreign corporations and individuals who are not citizens or permanent residents.
The party is also promising a $5,000 rental subsidy for those struggling to make rent and would also double the first-time home buyers’ tax credit.
What We Like...and Don’t About the Platforms
Are you ready for us to step onto the proverbial soapbox?
What all three platforms do not address is the real problem for housing affordability, which is lack of supply. Time after time, why is that never discussed when the issue of affordability comes up?
One explanation may be because it’s a very complicated solution, with unspeakable levels of jurisdiction and red tape, and quite frankly doesn’t make a good sound bite. High school economics teaches us about supply and demand, and it’s not hard to imagine why it’s difficult for developers to build as many housing units as they’d like given the hoops they have to jump through. Each party talks about building homes, but how about making it easier for the builders and developers to do this for us?
For the Liberals, in particular, they’ve had years to solve escalating prices which at first were a problem of two or three cities, but have now spread to cities all over Canada. Their main repeated solution was to tweak mortgage qualifying rules to no avail. This time their platform states a goal of building 1.4 million housing units, but where was this idea before? And how exactly are you going to do this?
We do like the idea of cutting the insurance premiums at CMHC. This institution has been an immense cash cow for Ottawa for decades. Our concern would be this would affect the profitability of CMHC’s two privately run competitors who quite frankly stepped up to the
plate more than CMHC when the market became difficult the past few years, especially in Alberta. So we’re torn on whether this is appropriate or not.
Blind bidding is another contentious issue. In certain hot markets, the practice has been greatly abused to the detriment of protecting the buyer consumer. There has to be a solution to this, but getting the real estate industry on board is going to be a tough nut to crack.
The Conservatives in turn have a build goal in mind, but again is the Federal Government now a developer or are you going to make it easier for real developers to do their job? We like the idea of addressing foreign ownership, but if it’s a temporary halt to the practice, how about making some tax money from them in the future when the ban is lifted?
We love the idea of the stress test not applying to renewals. This is something our industry advocated for from the beginning. Changing this requirement will allow consumers a much greater choice on mortgage products at time of renewal as some cannot make a move using the new requirements and are at the mercy of their current lender for products and the rate offered.
The NDP’s high-level points are interesting, but again we’d ask how we can make supply easier? As mortgage brokers, we’ve never liked losing the 30-year amortization option, and find it funny you can still have that option on a non-insured loan. The logic that you buy your one and only house and pay it off in 25 years or less is just not realistic these days, so a longer amortization makes sense in some cases. Taxing foreign ownership for non-residents is interesting, but we’d need to see studies on how that could affect certain vulnerable markets like Toronto and Vancouver where prices have elevated over the years based on a higher number of foreign ownership purchases.
Overall, it’s difficult to say what party we’re most optimistic about for their housing policy. The devil is in the details as they say, and who’s to say policy turns into implementation anyway right? All we know as mortgage brokers is that a half dozen changes in mortgage policy have done very little to solve the main issues, so we look forward to any leader that can come up with some real solutions for the future.