Did you hear about that NCAA swimmer who won gold in his race, in record time, but was disqualified?

Tough one to swallow here.

He wasn’t disqualified because of performance-enhancing drugs, nor did he wear flippers in the pool.

His crime?

Celebrating too early.

True story, and I’m not embellishing here.  There’s no technicality on this.

The swimmer won his race and – as most swimmers do, he jumped in the air in glee, then hugged his teammate in the adjacent lane, while straddling the barrier between lanes.  He and his teammate celebrated their 1-2 finish together in the next lane.

And then came the disqualification.

By rule, a swimmer can’t “interfere with another swimmer” in a different lane, and although both of these swimmers had finished their races (gold and silver medals, respectively).

And that was that!

The disqualification was announced over the P.A. system, the gold-medal swimmer fell to his knees and cried, and after protest, the swim officials refused to change the decision.

Forget that hundreds if not thousands of swimmers have “prematurely celebrated” in swim events in the past in the exact same way.  But sometimes, people with power like to enact that power, for no good reason, consequences be damned.

My point is this: I had planned on taking a victory lap today.  I had planned on a massive celebration.

But shall I cross into an adjacent lane to do so?

Metaphorically or literally; I’m not sure.

To be fair, some might want to ask, “Why would you celebrate the fact that the Canadian Mortgage & Housing Corporation has canceled the First-Time Home Buyers’ Incentive?”

Good question.

Maybe it’s because I like being right?

Maybe I have a huge ego and this is how to satisfy it?

Or maybe, just maybe, it’s because I’m an experienced, interested, real-estate and housing enthusiast and onlooker who would love nothing more than to see “affordability” in the marketplace, but who has grown so tired of three levels of government who continuously fail in their efforts to help their constituents, and thus I am choosing to hold the government accountable when they fail.

Yes.  I think that’s it.

I wanted to call this blog “Monday Morning Quarterback: Hate To Say I Told You So,” but it seems I’ve done that bit before…

January 22nd, 2021: “The Friday Rant: Hate To Say I Told You So!”

That was a victory lap, if I’ve ever taken one!  And believe me, through seventeen years of blogging, I’ve taken many…

So I figured that, on account of spending the weekend listening to “Dookie” multiple times, and having in my possession two tickets to the Green Day concert this August (who else bought their tickets ten months in advance??), perhaps Billy Joe Armstrong’s best-known work could lend a title to today’s blog.

Good Riddance.

Commonly known as “Time Of Your Life,” which is an incorrect title, the song is also well-known for being played in the last episode of Seinfeld.

Good riddance.

Good riddance to the ridiculous, ill-conceived, poorly-thought-out, destined-to-fail, voter candy that was the first time home buyer’s incentive.

Do I have to go back and explain what all this is?  Just in case some of you don’t know?  Alright, quickly…

Back in 2019, which happened to correspond with an upcoming federal election, there were rumours that the government was going to introduce a “shared-equity mortgage” as a way of helping would-be home-buyers to get into the market.

I first wrote about this early in the year:

March 20, 2019: “Should The Feds Introduce Shared-Equity Mortgages?”

There were 45 comments on that blog post and all hell broke loose.

The TRB readers did not like the idea of the federal government introducing these measures.

My favourite comment from a TRB reader on the post that day was this one:

As a voter who cast a ballot for the Liberals in 2015, I already had my mind made up to go blue in October, but this is the icing on the cake. These measures are so hollow it makes me sick. Looking at Trudeau’s smiling face along side Bill Morneau makes me embarassed to have ever trusted these clowns. You can almost feel their distain for the people they represent. No morals. No leadership. Just self-preservation. SHAME!

Suffice it to say, there were other good ideas at the time as to how first-time home buyers could be helped:

1) Extending the CMHC-insured mortgage amortization from 25 years to 30 years for first-time buyers.
2) Increasing the amount a first-time buyer can borrow from their RRSP from $25,000 to anywhere from $30-$50K.
3) Reducing the mortgage stress test from 2.0% as far down as 0.75%.

But, no.

These weren’t sexy enough.

Yes, it was an election year, and yes, I’m choosing to link the election with this ridiculous piece of legislation.

Here’s what was implemented:

To help make homeownership more affordable for first-time home buyers, Budget 2019 introduces the First-Time Home Buyer Incentive.

• The Incentive would allow eligible first-time home buyers who have the minimum down payment for an insured mortgage to apply to finance a portion of their home purchase through a shared equity mortgage with Canada Mortgage and Housing Corporation (CMHC).
• It is expected that approximately 100,000 first-time home buyers would be able to benefit from the Incentive over the next three years.
• Since no ongoing payments would be required with the Incentive, Canadian families would have lower monthly mortgage payments. For example, if a borrower purchases a new $400,000 home with a 5 per cent down payment and a 10 per cent CMHC shared equity mortgage ($40,000), the borrower’s total mortgage size would be reduced from $380,000 to $340,000, reducing the borrower’s monthly mortgage costs by as much as $228 per month. Terms and conditions for the First-Time Home Buyer Incentive would be released by CMHC.
• CMHC would offer qualified first-time home buyers a 10 per cent shared equity mortgage for a newly constructed home or a 5 per cent shared equity mortgage for an existing home. This larger shared equity mortgage for newly constructed homes could help encourage the home construction needed to address some of the housing supply shortages in Canada, particularly in our largest cities.
• The First-Time Home Buyer Incentive would include eligibility criteria to ensure that the program helps those with legitimate needs while ensuring that participants are able to afford the homes they purchase. The Incentive would be available to first-time home buyers with household incomes under $120,000 per year. At the same time, participants’ insured mortgage and the Incentive amount cannot be greater than four times the participants’ annual household incomes.

There was criticism of this plan right from the start!

Nobody, and I literally mean nobody with experience in the real estate or lending field, thought this was a good idea.

But while there are many reasons why people didn’t think it was a good idea, those reasons could basically fall into one of two buckets:

1. Because people thought the program wouldn’t work.
2. Because people thought the CMHC, who already insures mortgages on the backs of taxpayers, shouldn’t get into the business of co-buying houses.

For the record, I fall into both camps, as I know many others do as well.

At the onset, the idea that purchase prices needed to be under $480,000 confused the hell out of people.

I say “confused” and not “amused” because many of us thought this had to be some sort of mistake, right?  With home prices in greater Toronto and greater Vancouver – where about one-quarter of the entire country lives, far exceeding $480,000, exactly who was this program going to help?

Not only that, the average home price in the entire country in 2019 was $502,811, which is more than the value of the homes that the CMHC was willing to “help” buyers purchase.

After being confused, most of us eventually did come around to being amused, since the program was such nonsense.  But shortly thereafter, folks like myself and other like-minded realists started to wonder, “How much is all of this going to cost?”  And of course, “Why did the government roll this out in the first place?”

Another of my favourite comments on TRB from that 2019 post:

With a cap of $480,000 on the purchase price isn’t this just an attempt to impress rural voters and the working class poor in major markets? In most world class cities the poor don’t own property. Why does this government think that renting is such a bad idea? And what will the qualification process be like for a couple that each make $39,000 per year? Can they even qualify for a mortgage? Is this program actually realistic?

These are the questions that many of us hoped the federal government would have asked, internally, when deciding whether or not to roll out this program.

Unfortunately, their decision to roll out the sexy, headline-catching First Time Home Buyer Incentive likely had more to do with providing voter candy before an election than it did with actually helping Canadians.

I don’t know what’s worse:

a) The government knew this program wouldn’t work, but launched it as voter candy.
b) The government, who is apparently supposed to look after our best interests and govern us accordingly, really, truly thought that this program would work, despite everybody outside of government knowing it wouldn’t.

Then along came last week’s news.  Except, it was only news after it was found out.

Huh?  Need an explanation?

Sure.

The CMHC didn’t call a press conference and make an announcement.  They merely updated their website.

The story was reported on by virtually every news outlet, but look at the sub-heading in the Toronto Star headline:

“quietly”

I love it.

The CMHC website had this to say:

The First-Time Home Buyer Incentive has been discontinued.

The deadline for new or updated submissions for the First-Time Home Buyer Incentive is midnight ET on March 21, 2024.

That’s it?

No fanfare?

No press conference?

I guess when you’re admitting a massive failure in public policy, you don’t wrap a bow on it.

A spokesperson for the CMHC had this to say:

“After a review of federal housing plans in light of the current housing situation, the federal government decided that the First Home Savings Account (FHSA) is a better tool to help first-time homebuyers buy a home.  Refocusing this funding will also allow the government to focus on other impactful policy areas”

So they’re canceling the program, but they’re not saying “We’re canceling the program.”  They’re saying, “We think this other idea of ours is better.”

That’s so cute.

I just wonder how much money the government spent on this program.

This is the same government that said the ArriveCan app would cost $80,000, but ended up spending $60 Million in the end.

Policy like this doesn’t just appear and then disappear.  This takes time and money to plan, implement, and oversee.  I can’t imagine how many studies, reports, reviews, or commissions the government paid for, or how many consultants, experts, and advisors they hired during the process.

And all this could have been avoided just by using the good, old-fashioned “smell test.”

What an incredible shame.

For the tens-of-millions of dollars (or more?) that the government spent on doomed-to-fail policy, they could have built a house.  Or two.

After the CMHC updated their website, the media eventually picked up on the cancelation and reported on it.

Here’s a screen-shot of my phone after searching “CMHC” on Sunday morning:

The headlines weren’t pretty, either.

Here’s one that I liked:

“‘It Will Not Be Missed:’ Ottawa Cancels First Time Home Buyer Incentive”
The Globe & Mail
March 1st, 2024

Every article seems to be ripe with commentary on how the program didn’t work, and/or was never going to.

Here’s a quote from the Toronto Star article referenced above:

“It was a lot of smoke and mirrors,” said Sialtsis. “I’m not surprised that they discontinued the program.”

How about this:

“CMHC Scraps First Time Home Buyer Incentive”
Financial Post
March 1st, 2024

Here’s a selected excerpt from the article:

Though the FTHBI aimed to assist first-time homebuyers, it faced criticism for its limited impact, particularly in high-priced markets.

In 2022, documents presented in Parliament at the request of the Conservatives showed the program had received 23,411 applications with only 15,925 approvals as of April 30, 2022, well short of the 100,000 expected during the first three years.

During that stretch, the program disbursed only $269 million, about about one-fifth of the anticipated amount.

Clay Jarvis, an author at the personal finance website NerdWallet, said the FTHBI was plagued from the start

“The incentive was dead on arrival. A shared-equity agreement with the federal government was never going to appeal to many people, and the program’s income limits were probably too low,” Jarvis said. “The government tried to make it more appealing by limiting the amount of equity it was entitled to, but no one cared.”

Solid quote by Clay.  I’m glad he got this in print!

But let’s go back to the start.

Let’s look at the why/what/how for a moment and then we’ll see the FTHBI in an even worse light, in my opinion.

Presumably, the “why” was to help buyers enter the market.

If that’s the case, then where were other, better ways of doing so, right?

Look at the mortgage stress test, for example.  The government, if they wanted to help buyers get into the market, could have simply eliminated the mortgage stress test for first-time buyers altogether.  That would have helped them qualify for a larger purchase price, or qualify to begin with.

Critics of this idea would suggest, “The stress test is there for a reason.  It’s there to ensure that buyers can afford to make their payments if and when rates go up.”

Another way of saying this is: “The stress test is there to keep out buyers who shouldn’t be there in the first place.”

Now, if that’s the case, then why the HELL did the government decide to start providing shared-equity mortgages?

Catch-22, no?

Can we all agree – and I know this might be difficult, that people who can’t afford homes shouldn’t buy homes?

If somebody was too drunk to drive, we would suggest that this person doesn’t drive.

So if somebody is financially unqualified to own a home, wouldn’t we suggest that they don’t buy a home?

Moreover, why would the government spend taxpayers’ dollars to take on this risk?

I know those last two comments might ruffle some feathers with the “Everybody deserves” crowd, but the logic is through and through.

Increasing amortization periods helps buyers with monthly payments.

Decreasing the mortgage stress test helps buyers qualify.

And increasing the amount of money that a buyer can withdraw from their RRSP helps with down payment and affordability.

However, there’s one subset of buyers that isn’t helped by any of this:

Buyers without enough money.

That’s what the shared-equity is about, right?  The government lending the buyer money.

But should these people really be buying homes?

Do we live in a country where we expect the most at-risk part of the population to take on such a financial risk and burden?

I’ve said it before, and I’ll say it again:

If the government wants to “make housing more affordable” then it should stop taxing the shit out of it.

Eliminate HST on new housing.

Eliminate land transfer tax.

Eliminate local development charges.

Those three items can make up as much as one-third of the cost of a single new unit of housing.

But of course, we can’t eliminate those three taxes, because the cities, provinces, and country desperately need that money.

In fact, development charges and city/province land transfer taxes will only increase from here on out, as will the number of other taxes that make housing unaffordable, or result in fewer homes being listed for sale.

That might seem like it’s unrelated, but this is exactly the problem.  In the context of “affordability,” the government continues to target demand-side measures and not supply-side measures.  Once upon a time, it was trying to keep buyers out of the market.  Policies that come to mind, dating back about fifteen years or so, in chronological order:

-Eliminating 40-year amortizations

-Eliminating 100% (or higher) financing

-Instituting minimum 5% down payments

-Instituting minimum 20% down payments on second properties

-Increasing CMHC premiums

-Instituting 20% down payments on properties over $1,000,000

-Increasing CMHC premiums again

-Introducing a mortgage “stress test”

-Increasing the minimum down payment from $500,000 – $999,000 from 5% to 10%

And more…

All of these policies were aimed at making housing less affordable to buyers, which was intended to remove buyers from the market, which would, theoretically, bring prices down.

But it didn’t.

Then in 2019, the First Time Home Buyer Incentive came along, with the intention of bringing more buyers into the market.

Except these weren’t buyers with a 19% down payment on a $1,000,000 house, or buyers who qualified for a mortgage 1.6% above prevailing rates and not 2.0% above prevailing rates.

These were, seemingly, the most unqualified buyers.

Does that make any sense at all?

Good riddance to bad policy.

And soon, hopefully, we’ll be saying, good riddance to those clowns who come up with it…