On Monday morning, I began the arduous task of sorting through a week’s worth of mail that had piled up and been left by my lovely wife in my home office.
Mail, eh? How could there be so much when we don’t really even use mail anymore?
More than a dozen flyers – several from politicians, since it’s that time of year, a beautiful letter from a Harvey Kalles real estate agent offering to buy my home, and a ridiculous amount of T5’s and T5013’s, since it’s that time of year again as well. Why do we still mail these? Seriously, what a waste of paper and postage! Add in a few invoices from my accountant, two postcards from my father to my kids, and last but not least, something from the Ontario government.
Those envelopes made from recycled brown paper give it away, right?
And what was inside?
A cheque for $170.00.
Ah, yes! The refund of my vehicle registration tax that I never asked for. How grand!
All I could think about, of course, was what a wasted exercise this was. The $170.00 going back into my pocket would surely be recouped through New Tax A, New Tax B, or Increased Tax C. And once that’s completed, and the government has their money back, what will it have cost them? How much was spent on these cheques, the postage, the staffing necessary to oversee the process, and more?
What an incredible waste of money.
And yet, this is how politics works. It’s simply smoke and mirrors.
Yeah, that’s my introduction to a conversation about the federal budget that was released last week, and I know it’s impossible to write the following without including bias, opinion, and political leanings. I also know that many of the TRB readers support the federal government, since they did achieve 32.62% of the popular vote in the 2021 election, so odds are, a third of the readers love the government, the party, the leaders, and the budget.
But I’m not exactly the biggest fan in the country, suprise, surprise.
It’s not just the insane amount of time and effort spent on “housing affordability” that irks me, but rather the tax-and-spend theme that’s been the party’s M.O. since day one.
Then again, my good friend Chris tells me all the time, “A federal government should run a massive deficit in times of economic prosperity!”
Canada’s national debt stands, at the time of writing, at $1.16 Trillion, according to https://www.debtclock.ca/.
Then again, the United States’ national debt is at $30.4 Trillion according to https://www.usdebtclock.org/.
The average debt per citizen in the United States is three times higher than in Canada.
So who’s in a better position? Them, because they have more debt and have spent more on their citizens, or us, because we carry less debt?
Despite all this talk about debt, I watched Chrystia Freeland say something incredible the other day; something that I couldn’t believe came out of her mouth:
“Our ability to spend is not infinite. The time for extraordinary COVID support is over. And we will review and reduce government spending. Because that is the responsible thing to do.”
Wait.
What?
Reduce government spending?
Isn’t this government all about spending?
Just when I was starting to come around on the idea!
I said that I would discuss how the federal budget will affect the housing market, but it’s not possible to do so without first pointing out how much this government spends, because it shows how much they want people to have. And therein lays the problem as it relates to housing, because this government wants everybody in Canada to own a house, which is simply not possible
A brief intermezzo, if you will…
When I was in London last week, we took a walk through Hampstead Heath and my brother pointed to a house on the other side of the train tracks.
“My colleague just bought that house,” Neil said. “It’s his first house.”
Now, in Toronto, we can assume this individual is 27-years-old, perhaps a few years out of school, maybe 5-6 years of working under his belt, and it’s his “time” to get into the housing market.
But in London?
“My colleague is 46-years-old,” Neil said. “Married, three kids.”
Incredible.
This individual graduated from university at age-22 and began working. He found a partner, got married, had three kids, raised them, and continued to work – and rent. Because that’s what Londoners do; they rent. Their housing is expensive and most of them know that they will never own. But this colleague of my brother’s worked for twenty-four years and eventually, at age-46, bought his first house.
Meanwhile, in Toronto, scores of mid-20-somethings are bitching and moaning about “housing affordability.”
The newspapers are lined up to take photos of that sad couple, just engaged, ready to start a family, who can’t afford the detached, 4-bedroom home that they want in the central core.
How do we explain the difference between the two mentalities in London and Toronto? Why do Londoners accept their market for what it is, but Torontonians look to the government to “fix” the problem?
That question is rhetorical, or so it should be by now. I’ve been talking about this for years!
We have a socialist government who wants everybody to have, and while I don’t think that free medical, free dental, free daycare, free drug plan, and free hugs are a bad thing, we still have to find a way to pay for all of this. Unless we’re going to run a $30 Trillion deficit, that is…
So when it comes to housing, what can the government do? They sure aren’t going to stand in front of a podium and tell people the truth: that they might (gulp!) not be able to afford what they want, when they want, and where they want. So instead, we continue to make promises that we can’t keep, and make plans that lead to nowhere.
The federal budget is exactly that when it comes to housing policy.
Kudos to the government realizing that we have a “supply problem,” which is the buzz-word for 2022, even though I’ve been saying this for a decade!! But in order to create supply, which, in theory, could lead to a balanced market, the government’s plan is to spend a ton of money.
So without further adieu, let’s look at their plan.
Page One, Chapter One, we read this:
Everyone should have a safe and affordable place to call home.
But that goal—one that was taken as a given for previous generations—is increasingly out of reach for far too many Canadians. Young people cannot imagine being able to afford the house they grew up in. Foreign investors and speculators are buying up homes that should be for Canadians to own. Rents in our major cities continue to climb, pushing people further and further away from where they work.
There’s that word again: should.
Everyone “should” have an affordable place to call home.
But who defines “affordable?” That’s my issue, since allowing individuals to link the words should, home, and affordable, leads to entitlement that we don’t see in London, Paris, or New York.
Overall, the government breaks down their plan into the following sections:
1.1 Building More Affordable Homes
1.2 Helping Canadians Buy Their First Home
1.3 Protecting Buyers And Renters
1.4 Curbing Foreign Investment & Speculation
The report, which you can read in full HERE, is easy to read and well laid-out. I’ll give it that!
So let’s look at each section and I’ll give you my thoughts on the important points.
–
1.1 Building More Affordable Homes
$4 Billion Housing Accelerator Fund
This is $4 Billion over five years, starting in 2022-23, and the funds are given to the CMHC to launch the fund itself.
The fund is targetting the creation of 100,000 new new housing units over five years.
My Take: No matter what number they assigned to this, I was going to say it’s low. There is little-to-no information about how the funds will be dispersed, when, where, etc. But there’s mention of “municipalities,” which I think is important, since I have always believed that building and creating housing starts and ends at the municipal level.
–
Using Infrastructure Funding To Encourage More Home Construction
$43 Billion in new and existing federal funding over the next ten years that will be leveraged to encourage the construction of more homes for Canadians.
My Take: There’s not a lot of concrete information here, but the numbers given are significant. This feels like fluff. They’re touting money they’ve already planned to spend.
–
Rapidly Building New Affordable Housing
A “proposal” to provide $1.5 Billion over two years, starting in 2022-23, to the CMHC to extend the Rapid Housing Initiative.
This will create at least 6,000 new affordable housing units.
My Take: Great! Why not spend more?
–
Speeding Up Housing Construction and Repairs For Vulnerable Canadians
Specifically, shelters, homes for seniors, persons with disabilities, and supportive housing.
$2.9 Billion is earmarked for this.
The goal is the creation of 4,300 new units and the repair of 17,800 units.
My Take: Great! Again, I have no issues here; how could anybody? And again, I’m not averse to spending more.
–
Direct Support For those In Housing Need
$475 Million in 2022-23 to provide a one-time payment of $500 to those facing housing affordability challenges.
My Take: This is possibly the dumbest thing I’ve ever heard.
$500? Really?
Who qualifies? How? Where? What do they do with the $500? What if they spend it on tickets to the Red Hot Chili Peppers?
This reminds me of a David Cross comedy routine where he hammers the George W. Bush government for promising everybody in America $100. He mimics a naive, uneducated Southerner who says, “Wait a minute….what about all them lear-jet-flying, caviar-eating rich folk. Do they get $100?” He then says, “Oh, no, no. They get billions and billions of dollars in tax cuts.” The Southerner then pauses and says, “But I still get my hundred dollars?”
This is just so silly, folks. Ideas like this drive me nuts.
–
Affordable Housing In The North
Providing $150 Million over two years, starting in 2022-23, to support affordable housing and related infrastrucure in the North.
My Take: The more important issue pertaining to the north: how long until Russia invades the north in search of oil?
–
Multigenerational Home Renovation Tax Credit
Up to $7,500 in support for constructing a secondary suite for a senior or an adult with a disability.
My Take: Why only seniors and the disabled? What about a 21-year-old son or daughter who can’t afford market rent? Also, what is “support?” This isn’t cash. This is a claim. I have no issue with this, in fact, I think it’s a great idea. But they’ve narrowed this to a particular segment of the population and I think it’s short-sighted. If the government wants individuals to create new housing supply, then helping them pay to create a new unit within an existing dwelling is a great way to do it!
–
Greener Buildings And Homes
$150 Million over five years, starting in 2022-23, to Natural Resources Canada to develop the Canada Green Buildings Strategy.
My Take: This is the government giving another wing of government money. It’s $150 Million to “develop a strategy.” Is this job creation?
–
Improving Community Responses to Homelessness
$18.1 Million over three years, starting in 2022-23, to Infrastructure Canada to conduct research about what further measures could contribute to eliminating chronic homelessness.
My Take: This isn’t $18.1 Million to help the homeless but rather to “conduct research.” This drives me insane! Fund studies and reports and create jobs. My wife is a social worker and we talk about the causes of homelessness all the time, so I won’t get into this. But my take is that you can’t eliminate homelessness, so let’s spend that money to support the homeless rather than create government jobs and fund studies to tell us what we already know.
–
1.2 Helping Canadians Buy Their First Home
Tax-Free First Home Savings Account
The new TFFHSA gives prospective first-time buyers the ability to save up to $40,000 via tax-deductible contributions, and the withdrawal would be tax-free.
My Take: Sure, why not! But as I always say, any reduction in government tax revenue will be offset by new or increased tax revenue elsewhere. So this is simply giving the next generation a break while potentially increasing taxes on individuals who have never benefited from this program. The estimated “support” is $725 Million over five years, so that’s $725 Million that the government will look to generate elsewhere. I don’t really have an issue with this plan, although people who can’t save, can’t use it. So do we want trust-fund kids taking advantage of these savings?
–
Doubling The First-Time Home Buyers’ Tax Credit
This takes the FTHBTC from $5,000 to $10,000.
My Take: Sure, why not! See above. Where does the offset in revenue come from? Also, how far does $10,000 go in Toronto versus Saskatoon?
–
Supporting Rent-to-Own Projects
$200 Million in dedicated support under the existing Affordable Housing Innovation Fund, which includes $100 Million to support non-profits, co-ops, developers, and rent-to-own companies building new rent-to-own units.
My Take: Did anybody notice how “non-profits” and “developers” were grouped together? What the hell is this?
–
1.3 Protecting Buyers And Renters
Moving Forward On A Home Buyers’ Bill Of Rights
$5 Million over two years, starting in 2022-23, to the CMHC to bring forward a national plan to end blind bidding, ensure a legal right to a home inspection, and ensure transparency on the history of sales prices on title searches.
My Take: I can’t possibly sum this up in a line or two. I have no issue with “ending” blind bidding, except that I know it’s impossible, unless the government takes over the purchase and sale of all real estate in the country and sells via their own platform. We’ve discussed this at length before. We’ve also discussed the idea of mandatory home inspections, mandatory cooling-off periods, etc. I am all for consumer protection, but I don’t have faith in the government to implement meaningful legislation that is well-thought-out and has no unintended consequences, like every piece of legislation they put out there.
–
Housing For Canadians, Not Big Corporations
A federal review of housing as an asset class, in order to better understand the role of large corporate players in the market and the impact on Canadian renters and homeowners.
My Take: There’s no plan here, just a mention of doing further research. This could potentially end the commoditization of real estate, which has been gaining momentum either through shared-equity mortgages or fractional ownership.
–
1.4 Curbing Foreign Investment & Speculation
A Ban On Foreign Investment In Canadian Housing
Propose restrictions that would prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non- recreational, residential property in Canada for a period of two years.
Refugees and people who have been authorized to come to Canada under emergency travel while fleeing international crises would be exempted. International students on the path to permanent residency would also be exempt in certain circumstances, as would individuals on work permits who are residing in Canada.
My Take: It’s too late for this. Way, way, way too late.
–
Making Property Flippers Pay Their Fair Share
New rules to ensure profits from flipping properties are taxed fully and fairly. Specifically, any person who sells a property they have held for less than 12 months would be considered to be flipping properties and would be subject to full taxation on their profits as business income
My Take: I cringe when I hear the words “pay their fair share.” It reminds me of Jagmeet Singh referring to high-income individuals not paying their “fair share” despite a 53% marginal tax rate at the top level. If this new rule is intended to have an effect, then it has to be longer than 12 months. The way permitting and supply chain issues drag on and on, it’s tough to move a property inside 12 months if one is actually doing a renovation.
–
Taxing Assignment Sales
Make all assignment sales of newly constructed or substantially renovated residential housing taxable for GST/HST purposes, effective May 7, 2022.
My Take: No kidding! Why was this not already in place? I believe there are billions of dollars of lost tax revenue, notably through capital gains, on assignments in the last twenty years. Especially with respect to the foreign buyers who put down a 5-10% deposit on a condo then flip the paper in 12-36 months.
Alright here goes.
I’m going to say this, but please, please don’t gloat…
I have no issue, overall, with this budget as it pertains to the housing market. In fact, I’m presently surprised by the content.
Don’t get me wrong, it’s far, far from perfect, and I have many issues. But I read the whole package twice and overall, I expected worse. I expected more nonsense – like giving people $500 for no reason, and I expected more handouts, more freebies, and more legislation that would have unintended consequences.
But overall, I think this gets a pass.
Dammit. I can’t believe I said that.
Look, if we’re at a point where the budget gets a pass because it’s not loaded with nonsense, then there’s a larger problem at hand here! But many among you don’t believe in the same “problem” as I do, notably that there’s no such thing as free.
“Free” doesn’t exist. Somebody has to pay for it. So if any the government, at any level, in any country, offers a new “free” service, it’s going to be paid for by increasing taxes or creating new ones, or, cutting services and/or expenditures elsewhere.
That’s the problem I have with governments that are not fiscally conservative, but I also don’t like the message that “free” sends to a population that’s looking for reasons to coast.
But do I have issues with the money the government is going to spend with respect to housing?
Nope.
Four billion dollars for the housing accelerator fund? I’m on board.
Rewarding municipalities for initiative? Great.
Building affordable housing, spending money on homelessness, and helping veterans? Awesome.
What’s not to like in all of this?
And while I’m not against the “help” being provided to first-time buyers, I do cynically wonder what second-time buyers or older millennials, Gen-X’ers, and Boomers must think about this, since they didn’t benefit from the same help. Although, prices didn’t necessitate the help at the time.
I don’t know about the rent-to-own support. I’m not sold.
I don’t know what to think about any green initiatives.
The “Bill of Rights” is excellent in theory but none of their ideas are good ones.
I love the idea to ban foreign investment, but they can’t, since the government doesn’t have the resources to ascertain the source of funds when somebody on the ground here – a citizen or permanent resident, is buying.
Taxing assignment sales is a no-brainer.
All in all, these initiatives get a “pass.” But I don’t know if they’ll actually make housing “more affordable.”
I’m still waiting for the principal residence tax exemption to be overturned, since that will be the biggest source of new tax revenue in the history of the country. But for now, so long as no more crazy ideas hit the forefront, I’m alright with all of this.
Earlier this week, Chrystia Freeland said:
“This is the most ambitious housing plan to tackle supply that the Canadian government has ever put forward.”
We’re grading on a pretty rough curve here, but at face value, she’s not wrong.
Average Joe
at 7:40 am
https://www.oecd.org/els/family/HM1-3-Housing-tenures.pdf
The UK and Canada have very similar home ownership rates in the mid to high 60% range. And you’re saying the British don’t complain to the government to fix things? Are we talking about the same country that just burned down their economy to block European immigrants and trade via brexit? I understand this is an opinion blog, and a biased one at that. But now you’re just making things up.
David Fleming
at 9:07 am
@ Average Joe
I said “London” and “Toronto,” not “UK” and “Canada.”
Let’s be careful about the “making things up” part eh? 🙂
Average Joe
at 10:56 am
https://www.london.gov.uk/sites/default/files/housing_in_london_2019.pdf
According to the government, 52% of households in London live in an owned home. If you’re into numbers, take a look at page 20-21 for the trend over time. ~70% of people 55 and older own their home. The overall share is down from ~60% in the early nineties and is declining, but the majority still own.
As for sentiment, 97% of homeowners in London are satisfied with home ownership and only 63% of tenants are satisfied with private rentals (pg 33). You’d probably say that 37% of unhappy renters is an acceptable minority and they should be ignored. But people there are absolutely complaining and the mayor is publishing giant documents to address the London “Housing Crisis”. Here is the opening line:
“As Mayor, I know that our housing crisis is the biggest threat to London’s future.
It is the main reason why all Londoners cannot share in our city’s success.”
https://www.london.gov.uk/sites/default/files/2018_lhs_london_housing_strategy.pdf
You said everyone in London rents and is happy about it. That’s just not true.
Appraiser
at 8:38 am
It may surprise some conservative-minded folks that “socialist” initiatives like affordable child care and universal dental care are actually rooted in responsible and sound fiscal reasoning. In reality, they are prudent long term investments.
Outside of Quebec, the high cost of child care in Canada (and the U.S.) has prevented hundreds of thousands if not millions of women from entering or re-entering the work force in North America. This has been known for some time. Recent literature indicates than women doing equivalent work are on average 10% more productive than men. The benefit of affordable child care to the economy and to the bottom line (GDP) greatly overwhelms the cost (investment). https://timeforchildcare.ca/accessible-child-care-%E2%86%92-higher-womens-employment-%E2%86%92improved-productivity/
As for dental care, poor dental health is a serious drag on the economy. “Direct treatment costs due to dental diseases worldwide have been estimated at US$298 billion yearly, corresponding to an average of 4.6% of global health expenditure.”
“While oral health has been recognized as a basic human right by numerous dental and public health organizations internationally, more than 70% of the world’s population (mostly in low- and middle-income countries) are in need of appropriate and affordable oral health care.”
https://www.cda-adc.ca/stateoforalhealth/global/#:~:text=The%20economic%20impact%20of%20oral%20diseases&text=Direct%20treatment%20costs%20due%20to,4.6%25%20of%20global%20health%20expenditure.
As for hugs, they definitely prolong and improve life (and probably GDP).
David Fleming
at 9:08 am
@ Appraiser
I can’t argue with any of this! 🙂
Mike
at 9:34 am
I can’t imagine a TRB where you guys aren’t best friends.
Kyle
at 9:33 am
I don’t think there’s any evidence that the Conservatives are fiscally more responsible than the Liberals. Based on track record, i would say it’s actually the other way around: https://www.thestar.com/opinion/letters_to_the_editors/2020/12/05/conservative-track-record-betrays-partys-claim-of-fiscal-prudence.html
Politics aside i would agree this isn’t a bad budget. When we talk about affordability of housing, IMO it’s the northern communities, people living in tents in parks, living in their cars, or the multiple families crammed into a home meant for half the occupants that really define the housing crisis.
Despite them getting all the press i don’t see renters struggling to to own as being a pressing problem. While i don’t agree with all of the budget, i think it does try to address the actual housing crisis, rather than just pandering to the loud, angry crowd who tries to frame their personal ownership crisis out to be the housing crisis.
Will
at 1:22 pm
I agree! It’s not great. But it’s not bad.
If the #1 complaint that David has is that the positive moves didn’t happen years ago, my go-to idiom would be “the best time to solve a problem was years ago. the second best time is now.”
I will say, the BoC is doing a lot more to solve the issue of housing affordability than any government is, and without government interference – as by design. I worry about Pierre Poilievre’s attacks on the BoC because history and other countries show that if you really want chaos, you go after the central bank’s independence.
Jennifer
at 11:13 am
Re the tax free account and your comment re people who can’t save, can’t use it. If a person can’t save up to $8,000 annually to contribute to this account, they have no business buying a house. Who cares if some trust fund kids may benefit from it, that should not take it away from the majority. This account is huge. I would have opened it up the day after budget if I was thinking of buying my first home.
Estate of Nature
at 12:47 pm
How can a country that prides itself on diversity and inclusion have such a hate on for foreign buyers?
McBloggert
at 12:58 pm
Well I think Canada is all for diversity and inclusion…for residents of Canada. You can be purple, green, rainbow sherbet and the Budget does not discriminate, save for that one nit picky detail of being a permanent resident or an international student.
If you are a non resident of Canada, looking to launder err, diversify your holdings in a safe country, then, Canada is not looking for that diversity in its housing mix.
Estate of Nature
at 2:16 pm
Canada is a relatively clean, safe country with a very favourable exchange rate.
Picking up an investment or vacation property here seems like a completely rational response to everything going on in the world.
I think it’s prejudicial to assume affluent foreigners who have done so are predominantly money launderers.
Rather than implementing an outright ban, perhaps officials could explore vetting the source of funds as part of the closing process (which would also apply to Canadians).
I don’t think we’d like it if Canadians with means were (a) reflexively viewed as criminals, and (b) prohibited from buying an apartment in Paris or condo in Arizona for no other reason than where they happen to have been born.
Something tells me the rate of non-Canadian “student” ownership will go up over the next two years…
McBloggert
at 7:52 am
I don’t disagree with your assessment that Canada is an attractive place to acquire a safe investment property. However, I see little public policy imperative to satisfy international demand before domestic.
Put more simply, I don’t care if foreign nationals are barred from buying investment properties in Canada (FYI you can still buy a cottage in Muskoka). Housing, while increasingly commodified, is not a publicly traded stock and there is no expectation or guarantee that non residents have the right to acquire Canadian real estate. I wish this would extend to land banking of agricultural and industrial lands – I think that is a more significant issue, but that is another subject.
Do I think this will have an impact on housing prices? Probably not in a significant way. But are we experiencing a kitchen sink moment – yes. In two years we will have enough data to see if this was successful in meeting its objective; if it hasn’t it will be removed.
Estate of Nature
at 12:27 pm
I feel like foreign ownership is a red herring, and the objective of a loose ban is simply to mollify frustrated Canadians.
Appraiser
at 1:36 pm
The foreign buyers ban was a hasty election promise made by the Libs in order to match the other parties at the time. I was hoping they would forget about it. Thankfully it has lots of exemptions. But still a mistake.
Estate of Nature
at 2:21 pm
The foreign ownership ban and yet another $500 payment for nothing are good examples that populism is not confined to one side of the political spectrum.
Kyle
at 2:50 pm
I agree this was thrown in as a bone to satisfy all the angry people who have bought into the idea that foreign buyers are what’s preventing them from being able to afford a home.
Wise to make this measure temporary, as it will have major unintended consequences, and likely little to no effect on prices. Per Benjamin Tal, of the 400K immigrants that become permanent Canadian residents, 70% are people who are already here in Canada. If we basically ban those 70% from being able to own, that’s going to have an impact on people’s decision to choose Canada.
Will
at 2:13 pm
Stupid question – but what’s stopping the federal government from saying something along the lines of “No single Canadian can own more than 3 single-family houses at any given time”?
Carve out an exception for multi-unit housing to encourage investors to build multi-unit housing, and possibly one for fractional ownership. Have a set date in the future (say 1 year) by which point owners have to sell.
Bryan
at 3:21 pm
Rent will skyrocket….. well, maybe. It depends on the specifics (you suggesting “no more than 3 homes” is certainly quite different that some of the “no more than one” suggestions that have been thrown around)
The dirty little (not so) secret in the housing market (in the GTA at least) is that the absolute dearth of any kind of purpose built rental properties in the last 20 years has led directly to mom and pop investors purchasing property and putting it up for rent to satisfy the demand for rental units. When they are successful with their first one (ie cashflow neutral/positive + property value increases), they either refinance their mortgage or use a HELOC to fund the down payment on another property, and another, and another etc.
I would be very curious to know how much of the rental supply in Toronto is made up of people’s 3rd, 4th, 5th, or 85th units. Perhaps more pertinently, what would happen if you take those units out of the rental market and put them up for sale? My guess is there would be a temporary decrease or levelling off in prices for entry level type homes… but the excess supply would be absorbed rather quickly by people who own just 1 or 2 homes who think “wow, properties are cheap and rent is about to rise” and the few lucky renters who have already saved close to a down payment. On the flipside though, there would be a permanent decrease in the number of rental units in a city/province/country that already doesn’t have enough of them. Rents will rise in kind and any renter who has not yet saved a down payment will have an even harder time doing so for that first foray into ownership.
The fundamental problem is the “extra supply” everyone thinks can be added to the market by eliminating investors is not really extra. Rather it is being used as rental supply in a market where there is also a dearth of options. The more you add this supply to the purchasing market in this way (you could say, for example, people can only own one home rather than 3), the more you take from the rental market.
Kyle
at 3:31 pm
This is bang on. Controlling who can/can’t own, doesn’t improve housing affordability, it may improve ownership affordability, at he expense of rental affordability. But the number of shelters available to the number of households doesn’t change.
JL
at 4:33 pm
But wouldn’t you simply be turning renters into owners – which is what most people seem to want? The people renting out properties sell them (decreasing rental supply), and the people living in rentals purchase them and move out (decreasing rental demand). Sure, you don’t add more overall supply, but you shift the ownership/rental ratio.
It’s certainly a policy decision (to interfere in the market for a social objective like that), but if you prevent investors from accumulating more properties, conceivably that excess supply will be absorbed by end users instead.
Kyle
at 6:45 pm
Totally agree that would result in some of the higher end renters turning into home owners. However there is always a steady stream of fresh renter demand, unless the population is shrinking. Which means many of the lower end renters would likely end up homeless, when their landlords sell and they have to compete for the few remaining apartments.
But alas it doesn’t have to be win-lose. If we increase supply, it becomes more affordable for renters to become owners and for renters to stay renters.
Bryan
at 10:18 am
I share Kyle’s opinion on this.
In the short term, yes you would turn renters who were already close to saving a down payment into owners as supply shifts. I think there are many of these people personally…. and at each price point, a whole ton of renters can suddenly afford to own. This is one half of why prices never seem to decrease with any permanency and why I believe the extra supply will very quickly be used up. In the best case scenario, you might also slow price growth for a time… but what will the builders do? This is the other half of the equation. If demand from the types of people who buy pre-construction (ie investors and multiple property owners) gets cut, do we believe builders will continue to put up towers at the same rate? I sure don’t. The same number of people will want to live in the GTA/Ontario/Canada, but building will be less profitable for builders…. so they will build less. Sale prices will end up right back where they are now… maybe after a couple years of turbulence where some people lose and some win.
But what of the rental market? Removing a bunch of investors does not lower the burden of saving for a down payment while renting. As such, it also does not remove any of the newer or future renters from the rental market. Young people who come to the city for work after university(etc), need somewhere to live. They do not have the money for a down payment so they need to rent, regardless of whether house prices go up 5% a year or 15% a year. With less rental supply, they will have to pay more and can save less.
At the end of the day, I would predict a variable supply for purchasing (to match demand at current prices), a decrease in supply for renting, and steady demand for both. Prices will go up for both.
Chris
at 4:26 pm
Re: the first time home buyer’s tax credit, it’s actually only 15% of the amount so would double from $750 to $1500. Doesn’t get anyone much of anything when it comes to buying a property anywhere in Canada!
J G
at 5:36 pm
No one here talking about 0.5% hike today and likely 0.5% next meeting too?
Yep, all bulls here
Izzy Bedibida
at 7:43 pm
Too many people will be hurt when its time for renewal, as they were on an $$$mth payment schedule. Now that $$$ mth will rise and put them over the edge.
PM
at 7:00 am
dont really get this argument. Most ppl plan on working until 65. So if they signed up for a 25 year mortgage and are renewing after 5, why not just stretch it out to 25 again? Would keep the payments flat, or even lower, despite rising rates. Youll still pay it off during your working life if you got your first mortgage at 35 or earlier.
Condodweller
at 12:26 am
I’m curious to see what the fee does in the US. According to the minutes of their last meeting they contemplated raising by .5% there’s still talk of a mega raise. I wonder if they’ll do .75% or even a full 1%.
What’s more significant though is the language of the release. Inflation is almost 6% and not as transitory as previously believed and advertised. They are also firm on fighting it by keeping their target of 2%. In order to achieve it they have to increase the rate to the actual inflation number. Fasten your seatbelts.
All this will bring down prices but won’t affect affordability. It just means more profit for the banks and in turn more tax revenue.
sndsdry
at 4:59 pm
The BOC is irrelevant. Yes the rising rates in Canada will have an impact for sure, but Canada is just a small small fraction (drop in the ocean) compared to the US and we are at the mercy of the US Fed. Canada is absolutely irrelevant to their decision making. They will raise rates and Canada will have no choice to follow – collateral damage in the making.
J G
at 10:38 am
“Drop in the ocean” – stop using this inaccurate cliche.
Canada is about 10-12% population and 10% GDP compared to US. Drop in ocean implies 1:100000000000 vs 1:10
JPR
at 6:15 pm
In other news, City of Toronto just announced yesterday that they’re planning to increase development charges by 49% for residential development & 40% for non-residential development. Take that unaffordability! We’ll show ’em.
https://www.toronto.ca/wp-content/uploads/2022/04/8f42-DC-Fact-Sheet-April-2022-final-11am.pdf
Izzy Bedibida
at 7:46 pm
Here’s an older article which shed light on London’s affordability issues, and what is happening in the GTA. I have seen several friends stuck in this treadmill, and a few marriages ruined because of this:
https://www.tvo.org/article/are-londons-endies-a-warning-for-canadas-housing-market
Sam
at 10:54 pm
Market has slowed down. Seeing more properties sitting for longer. Some sold at or below ask. Something is happening. With it without fed budget.
Andrew
at 10:01 am
David, how about a post about the largest interest rate increase in 22-years?
J G
at 12:49 pm
Won’t be the only one, good chance next meeting will be another half-pointer
Appraiser
at 1:53 pm
Yup, the usual suspects are chiming in. It’s gonna be a blood bath. The Wizard of Woodstock is preaching houseageddon as usual, the Oracle of O. S. is trumpeting prices falling and appraisals failing, while the Bloviator in Chief is once again predicting the imminent return of 1990 (for the umpteenth time +1).
What’s being ignored of course is that the housing crisis rages on. The economy is at full employment and 1,150 new people arrive in Canada each day. As interest rates rise and prices potentially flatten out, affordability is not improved. Shutting more people out of buying with higher rates, simply creates more renters and rents are already accelerating.
Build Baby Build!
Mike Stevenson
at 2:47 pm
Put me in the ‘blood bath’ camp. Scarcity is always the theme at peaks. That’s how you got to the peak in the first place. What comes next is sellers who need to dump assets to cover other leveraged losses, and then we find out that momentum works both ways.
J G
at 4:14 pm
“Prices potentially flatten out..”
Hahahaha
Keith
at 2:20 pm
A little history. Canada’s worst fiscal balance sheet was at the end of the Mulroney administration, when the debt to GDP ratio hit 70%. Today we are around 50 – 55% with federal revenue skyrocketing.
Interestingly, the Chretien/Martin Liberals reduced the size of the federal government to 12.8% of GDP, and made the most significant tax increases of my lifetime in order to put the government in surplus. Justin Trudeau has us at an all time record, in the high 16% range. Governments generally take action on big issues when doing little or nothing is no longer possible. Imagine significantly increasing taxes and getting re elected.
The biggest income tax was done by the much hated Pierre Trudeau, from a top marginal rate of 70 percent down to 50 percent. The tax rate doesn’t matter, research shows that people are remarkably consistent in taking action to reduce there overall income tax rate to about 30 – 35 percent, the higher the rate the more aggressively tax shelters are used.
Mike Stevenson
at 2:51 pm
It’s a classic phenomenon for the government to jump head first into a crisis right when it was about to fade anyway. Kind of like how the Feds are going to open their vaccine factory this year.
The big issue next year won’t be helping the people who can’t buy a home. It’s going to be helping the people who did.
Appraiser
at 7:44 am
So ominous. Stop it your scaring everybody.
Appraiser
at 3:56 pm
A Great Day for Canada:
“With a few strokes of a pen 40 years ago today, Canada’s Charter of Rights and Freedoms was adopted. Built around our shared values of equality, justice, and freedom, it protects the rights and freedoms that define who we are as Canadians – and brings us closer as a country.” ~Justin Trudeau