Should The Feds Introduce Shared Equity Mortgages?

Toronto Politics

9 minute read

March 20, 2019

I absolutely hate doing things twice in life.

But alas, here I am, re-writing this blog, and it hurts twice as bad to know I was all set to get out ahead of this.

I wrote two blogs on the weekend: one for Monday and one for Wednesday.  The first was about debt, and just how much conversation there was last week around the subject, and the second was about something that was on absolutely nobody’s radar: shared equity mortgages.

An article ran in the Toronto Star last week, and it was the first time I had heard anybody talk about shared equity mortgages in quite some time.  With respect to the federal budget, and what could be “on the table” in terms of helping first-time buyers and/or millennials when the budget was announced this week, these were the most talked about ideas coming into the week:

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%.

That’s it.

Those were the three big ideas.

Sure, some other ideas had been batted around, but do you know which idea was not discussed?

Shared-equity mortgages.

Go ahead, be a liar and say that you saw Tuesday’s announcement coming.

Because only one person that I saw, wrote about this before it came out, and that was Economics Columnist Heather Scoffield of the Toronto Star, who delivered this on Saturday:

“Are Liberals Ready To Take On The Risk Of Shared Equity Mortgages?”

Now there’s another person out there that did have this on the radar: me.  Thanks to Heather Scoffield’s article, of course!

I had this blog post ready to go for Wednesday, all about how the idea of “shared equity mortgages” is the logical next step for an illogical government who was looking to re-heat the housing market in an election year.  It would have been such an amazing blog, the day after the government introduced other measures to help address housing affordability, since the readers would have commented in droves, “You’re nuts.  Shared equity mortgages will never happen.”

But then it DID!

And it ruined my blog.

So let me start over…

Before last week, I hadn’t heard about shared equity mortgages in years.

Literally years.

I had to think back to the last time I read an article, or had a discussion about the idea, and I think it has to have been five or six years.

I receive odd emails all the time about a variety of subjects (having 2,000+ blog posts floating around on Google will do that), ranging from people looking to “buy distressed properties at auctions” (which of course doesn’t exist in the hot Toronto market), or “rent-to-own” programs which aren’t exactly in abundance, and last but not least, “shared equity mortgages.”

The last time I conversed with somebody who had emailed me from the blog, about shared equity mortgages, it underscored what I already knew going into the conversation: the person didn’t know how these things worked.

The guy basically asked me if I could help him “partner” with the government, or a not-for-profit, to help him purchase a home.  He was looking to me to “set up meetings with a few prospective partners” so that we could spot the best “deal” to be had.

As you would assume, he had zero money to bring to the table.  But through his “research” online, he deduced that he could offer this partner a “cut” of the appreciation on the property as a financial incentive for providing the down payment, and paying some of the mortgage and taxes along the way.

Back in the day, I didn’t mind having 15-20 minute conversations with people like this, partially to help them, but also to learn more about the human psyche.  Since then, I’ve learned my time is better spent, but I also get frustrated and a little depressed when I engage them.

I asked the guy, “If a company with financial means was interested in making money through real estate, don’t you think there are other vehicles available to them?”

He asked for an explanation, so I told him, “What I’m saying is that if you an entity to provide you with $25,000 for a down payment on a $500,000 condo, and effectively partner with you, as you describe, why wouldn’t they invest this $25,000 in a REIT, or lend the money on a standard mortgage?”

He said, “Because they should want to be involved at a grassroots level.”

Here’s where he lost me, if he hadn’t done so already.  When anybody in life explains what somebody else “should” do, or think, or want, then that person is simply projecting their own wants on others.

“How else are people like me expected to get into the market?”

Good question.

Enter the federal government’s announcement on Tuesday, and we now know.

The federal government unveiled their long-awaited budget on Tuesday, and as was expected, during an election year, and after the SNC Lavalin scandal, the budget was all about spending, and trying to appease every single voter with some sort of promise.

Pertaining to housing, they released their “strategy” which looked absolutely nothing like what was expected.

Here’s what the government released:

Budget 2019 – An Affordable Place To Call Home

As for the three expected policy changes/announcements:

1) Extending the CMHC-insured mortgage amortization from 25 years to 30 years for first-time buyers – NOT IMPLEMENTED
2) Increasing the amount a first-time buyer can borrow from their RRSP from $25,000 to anywhere from $30-$50K – INCREASED TO $35,000
3) Reducing the mortgage stress test from 2.0% as far down as 0.75% – NOT IMPLEMENTED

What else did the government implement?

This is what everybody is going to be talking about:

 


 

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.

 


 

Well, it finally happened.

The federal government finally went crazy.

I have so many thoughts on this that I almost resorted back to a child-like state, and took a Grade Two approach to this blog, by writing down ideas on different pieces of paper, then gluing them to a slab of bristol board, and ordering them to then be hand-written onto lined paper.  Yes, that’s what we did in the 80’s instead of simply opening MS Word and typing something we could edit later on…

Let me start with the obvious: this First Time Buyer Incentive is about votes, and nothing more.

Nothing more, because there’s nothing there!

Read the fourth point above, folks.  This only applies to properties with a combined “incentive amount” and mortgage amount that’s four times a household income, and that household income has to be below $120,000 in order to qualify for the program.

So…………where are all the $499,000 houses in Toronto and Vancouver?

Smoke and mirrors.  That’s what this announcement is.

But as I’ve said before on many occasions, people are too short-sighted to notice.  If young people today are willing to judge candidates for dating and or/marriage by spending 1/16th of a second on a single photo on an iPhone app before swiping right, then how hard do you think they’re going to scrutinize this budget announcement?  Do you think with the same expediency of dating, which is far, far more interesting and important?  Me thinks, yes.

The headlines will read “LIBERAL GOVERNMENT TO HELP BUYERS” and that’s about as far as most people will look into the matter, before getting back to photos of salads on Instagram.

So in my opinion, the vote-buying will work.  Good job, Liberals!

Now as for the actual plan itself, I’m troubled by this in so many ways.

For starters, didn’t the government spend the last two years trying to cool the housing market?  Why are they now trying to light it on fire again?

Oh, right, the election.  I forgot.  And I already mentioned that above, but doesn’t this concern anybody?  Are we to believe that the government really has a plan with how to tackle the housing market when their policies in 2019 completely contradict their policies in 2018 and 2017?

The bigger problem with the idea of a shared equity mortgage, of course, is that the government will be buying houses with people!  That’s basically what this boils down to.  The government, who had been bearish on real estate for two years, is now going to enter the housing market, hand-in-hand with the lowest-income buyers in the country.

What are the implications of this?

Well, for those of you that don’t like the mere existence of the CMHC, and the idea that a Crown Corporation is insuring banks’ mortgages, on the backs of taxpayers, then you will definitely not like this announcement!

Because now not only is the CMHC insuring mortgages, they’re giving people money for down payments!

Yes, I know, the proponents of this plan (are there any??) will note that the CMHC is going to take a portion of the profits down the line, as is the case with any shared equity mortgage, but what if, oh my, oh wow, I can’t believe I’m saying this (gasp!) the market goes…….down?

Then what?

Because there’s an argument to be made that the government will just eat the debt.

Impossible, right?

Except that in February of 2018, the federal government waived over $200 Million in student loans, marking the third time in four years that it had done so.

This government is great at spending money, even better at taxing, but not so good at collecting money owed.

What in the world is the government thinking – deciding to partner with buyers in the purchase of real estate?  As if the CMHC wasn’t already a large enough burden?

Far too often, we refer to the 2008 financial crisis in the United States without really explaining what happened.  For the casual blog reader, or for those who were not of age during that time period, let me take a moment to point out something important.

Fannie Mae and Freddie Mac are names that many people know, without actually knowing who they are, and/or what they do.

These two entities, created in 1938 and 1970 respectively, were formed in order to “stabilize” the U.S. residential mortgage market and to provide opportunities for home ownership throughout the country.  How they did that was quite interesting.  They purchased home loans from lenders (ie. banks) so that the banks could effectively offload their existing loans, and use the sale proceeds to make new loans to borrowers.

True, there are underwriting standards, but in 2008, both entities simply weren’t equipped to deal with the expected losses (they had guaranteed over $5 Trillion in mortgages, combined), resulting from the sub-prime mortgage rates that banks were offering.

And we know what happened then…

…Christian Bale, Brad Pitt, and Steve Carell made a movie together.

I bring this up because I think it’s important to differentiate between Fannie Mae & Freddie Mac and the CMHC, but also to be weary of lessons learned.

The CMHC insures mortgages provided by the banks, providing protection in the event of default.

Fannie Mae & Freddie Mac purchased mortgages from the banks to package and re-sell to investors.

There is a difference, and a big one.

But if the Canadian government is now going to step in and effectively purchase a small piece of the mortgage for buyers involved in the First Time Buyer Incentive program, then we are that much closer to what happened in the United States in 2008.

Feel free to tell me if you think I’m making a leap here, but I do believe that those of you who think the CMHC is already overburdened will agree.

Now for the last nugget, the government has yet to really explain how any of this is going to work.

Oh, that is sooooooooooooo government!

Make an announcement, and then when somebody asks how you’re going to implement the new policy, just say, “We’ll get back to you on that.”

Unclear at this point is how the government expects to be repaid, and how much they expect to be repaid.  And what restrictions would apply to your sale?  Can you sell at any time, at any price?  Can you deduct your land transfer tax and real estate fees from the profit?  This will all be explained “in the coming months” as was noted in several media reports.

In another media report, I saw that “full details won’t come out until the fall.”

The fall.

That’s when the election is, right?

So if the Liberals don’t win, then we never get to hear their grand plan for all of this?

Maybe they didn’t actually have a plan to begin with?

Maybe this is just politicking at it’s finest?

Let’s review.  The government that spent two years trying to cool the market, is now implementing programs that will re-heat the market, whereby they will take on even greater exposure and risk on the backs of taxpayers, but only for properties at price points that don’t exist in major Canadian markets, and hasn’t explained how they intend to do this.

Is that about right?

Well, this post is actually better than the one I had originally penned.  I believe there’s a direct correlation between dripping-off-the-page cynicism and quality of work, so allow me to pat myself on the back in the same way that Bill Morneau et al did today.

Oh – the government is also creating four new “dedicated real estate audit teams” at Canada Revenue Agency, at a cost of $50 Million, to try to track down more tax money.  Get ready for them to meet you at the cemetary the moment your grandmother kicks so they can dispute the stated value of her estate.  Think I’m joking?  Just you wait…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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45 Comments

  1. Carl

    at 7:12 am

    Just to add to the confusion, it is called “shared equity”, but according to most interpretations in the media it is simply an interest-free loan.

    The good news is what David saved for the end: CRA will get more serious about investigating fraud and money laundering in RE. That is long overdue.

  2. Levi

    at 8:23 am

    There’s non-stop coverage of the Liberal budget nonsense and vote-buying:

    Huffington Post:
    https://www.huffingtonpost.ca/2019/03/19/federal-budget-2019-flowery-housing-incentives-do-little-to-help-millennials_a_23696089/?utm_hp_ref=ca-homepage

    National Post:
    https://nationalpost.com/news/andrew-coyne-this-budget-is-a-testament-to-the-pleasures-of-endless-growth-federal-budget-2019

    https://nationalpost.com/news/canada/chris-selley-a-federal-budget-2019-from-a-government-that-has-abandoned-its-poetic-phase

    Financial Post:
    https://business.financialpost.com/news/economy/this-years-federal-budget-is-built-for-voters-not-business

    Globe & Mail:
    https://www.theglobeandmail.com/business/article-the-liberals-budget-is-an-investment-in-election-votes-and-its-bad/

    This is just the beginning.

    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!

  3. Kyle

    at 8:50 am

    This is madness. If this passes, then nano condos are going to be everywhere. Developers will start pumping out $1500 / sq ft beehives. And CMHC will have twice the equity in these, as any of the actual buyers.

    1. Joel

      at 9:38 am

      The caveat here is that CMHC doesn’t like to insure condos under 500sqft. They will do it, but it is an exception and they will only take so many per building.
      These are going to be the only properties in Toronto available for under $500K and they are not going to be eligible for this program.

      1. Kyle

        at 3:51 pm

        In your experience, do you know if Genworth is more willing to insure them?

  4. Nathan

    at 8:52 am

    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?

    1. Dan

      at 9:58 am

      It’s not really the government that thinks renting is a bad idea, its the rest of the population they are trying to pander to.

      Details are still to be finalized obviously, but from what’s there, the couple making $39K each would still need to qualify for a mortgage and minimum 5% downpayment before being able to enroll (?) in the program

    2. Alexander

      at 5:46 pm

      I had immediately same idea about rural voters and what worries me a lot that housing prices in rural areas are not growing as fast as in major cities. So, CMHC will have a share in the properties that actually depreciate in value in the long term….and taxpayers will be on the hook to recover the losses. This is the craziest idea that government could come up with and the only thing that warms my heart that it is so vague and crazy that it is not going to work. Or if it does, I will be out of this country by the time the sh**t hits the fan. I know who to vote in the next election…

      David, in the last paragraph you could not control your emotions and I can totally understand it. 10 days after I sold my income property in Feb 2019 CRA sent me a letter with instructions how I should pay my taxes with quarterly installments in 2019 , even though I probably should be paying my 2019 income taxes at the end of April 2020… The new normal.

  5. Chris

    at 9:27 am

    Well, I’m happy that the stress test remains intact, and amortization lengths remain stable.

    The RRSP tweaks won’t make a huge difference, as it seems unlikely many first time home buyers have $35,000 in this sheltered account.

    The equity sharing program is poor policy, but I don’t think it will have much of an impact. The maximum household income level, as well as the maximum mortgage plus loan amount of four times household income really limits this to the lowest segment of the market (or markets other than Toronto/Vancouver).

    They’ve also earmarked $1.25 billion over three years for this program. If we assume the average loan CMHC gives is $20,000, that will allow them to help 62,500 Canadian first time buyers, or about 20,800 per year. Bill Morneau stated there are ~100,000 first time home buyers per year.

    I also suspect some people will be hesitant to give the government a 5/10% stake in their home, when they will be the ones shouldering the burden of maintenance/repairs/upgrades, thereby increasing the value. I guess we’ll have to wait to see the details; do you repay CMHC the dollar amount they gave you? 5/10% of the proceeds upon sale?

    I’m happy about the funds for money laundering and fraud. As Carl says, that was well overdue.

  6. Another David

    at 9:34 am

    This millennial ain’t buying this liberal vote buying BS and will be voting blue regardless.

    The plan have so much issues, unless completely worked out, it can be subject to massive abuse and fraud.

    1. Dan

      at 10:00 am

      How would there be massive abuse and fraud?
      There already exists a first-time home-buyers program. Perhaps there is massive abuse and fraud in this, but I haven’t heard or see and statistics to support it.

      1. Jimbo

        at 12:21 pm

        https://www.thestar.com/news/canada/2019/03/21/dirty-money-is-driving-up-toronto-real-estate-prices-report-says.html

        There has always been accusations that Canada is soft on white collar crime. If you look up BC casinos, the group that bought into gaming in Ontario in the recent past you will see a trend. How true it is or to what degree in not sure.
        I will say that the RCMP were going to raid a big player but they were tipped off. A lot of negative press floating around about Christy Clark and the Liberal government being complcit. Sam Copper had written a lot about this before moving from Vancouver to Ottawa.

        1. Jimbo

          at 4:00 pm

          Could be large developers buying up properties for demolition or renovation as well.

          1. Dan

            at 9:41 am

            Don’t disagree with the comments above, but I still don’t see the connection of how these proposals would be subject to an increased amount of fraud or misuse.
            Corporations can’t use the first-time home buyers program, the shared equity is for mortgages, not cash transactions.
            What am I missing?

  7. Dan

    at 10:18 am

    I’m a bit indifferent on this at the moment, pending further details.
    You absolutely raise a lot of good and valid criticisms, and yes it’s complete pandering which is frankly what most governments do, regardless of political stripe.

    The $480k house price seems arbitrary, and not realistic for those trying to enter the existing market in Toronto and Vancouver.

    I think the risk to CMHC, specifically of writing of the debt may be a bit overstated. Not everyone is going to sell in at the same time for any market correction or downturn, these mortgages will also be insured by CMHC (or another lender). I’d think that would be a a significant difference as they aren’t going to abandon insuring mortgages, particularly one’s which they have skin in the game.
    I’d think it’s more likely that government realizes a profit from the program than a loss, but I don’t have a crystal ball for these things.

    1. Verbal Kint

      at 10:55 am

      “The $480k house price seems arbitrary, and not realistic for those trying to enter the existing market in Toronto and Vancouver.”

      I think that’s the point. Out in Alberta, Jason Kenney has been shouting and screaming that the stress test, though national, was aiming to solve a problem that only existed in Toronto and Vancouver (not really true) and that the government must make it easier on first time Alberta homebuyers. Wish granted.

      Now why does David have a bee in his bonnet? The budget crafts a program that doesn’t tinker with the Toronto market at all (what David wanted, no?) and he’s still angry. It’s like he decided he’d be angry no matter what…

      1. Chris

        at 11:02 am

        Small point, but I think the limit is actually higher than $480k.

        The conditions say the loan plus insured mortgage component can be a max of $480k (4x the max household income of $120k). This means the price of the house would be $480k + whatever down payment the buyer brings to the table.

        It’s unclear if the max down payment permitted with this plan would be 5%, or if a buyer could pony up 9.99%/14.99% (bringing them to 19.99%, to remain under CMHC insurance, a requirement of the loan).

        But either way, I think the maximum purchase price will be slightly above $480k.

      2. Mxyzptlk

        at 7:24 pm

        David decided he’d be angry because he despises the Liberals (and, needless to say, the NDP, the Greens and any other non-Tory party) and anything they have done or ever will do. A right-winger through and through, at least he’s true to himself.

        1. David Fleming

          at 9:06 am

          @ Mxyzptlk

          I don’t despise the Liberals. I have voted for Liberal candidates many times, both provincially and federally.

          I dislike the current federal Liberals, and I dislike their policies and platforms. I am a fiscal conservative, however. So a budget with nothing but spending doesn’t appeal to me, unless it’s on infrastructure. Had the Liberals proposed $10 Billion to built transit in Toronto, fix pot holes, improve highways, etc., I’d have been pleased. Same for any major city that is an economic engine, and houses a large percentage of the country’s population. If people had easier access across the GTA (or through other major cities), urban sprawl would thrive, and we wouldn’t be as concerned with the “housing crisis.” Fix the problem, don’t offer a band-aid solution.

    2. jeff316

      at 10:07 am

      I have nothing to say on David’s politics but I do agree that this program, while imperfect, targets the people that could need it the most while avoiding potential price inflation pitfalls in major markets. It might not be the right policy, but they’re implementing it in the right way. People in Toronto and Vancouver forget that it’s the knock-on effects of these markets that are hurting buyers outside. The housing market problem isn’t that white collar professionals can no longer own a house with a backyard a walk from the subway – it’s that the price increases in places like Hamilton, Milton, Burnaby, even Paris etc are pushing middle and lower middle buyers farther from home ownership.

  8. Housing Bear

    at 11:29 am

    Basically, we will give first time home buyers enough of tax payer money to qualify for a loan amount which is baked by tax payers.

    This could provide some support to Toronto prices in that it can perhaps put a higher floor on the surrounding GTA suburbs. Physiological at first in that the 905 may stop bringing down TREBS averages as much. Expect for the paid articles (ads) about how Hamilton is Toronto’s Brooklyn and all Millenials are fleeing there to fire up again. In the city proper I think Kyle is right, developers will try to offer more and more nano condos to support the highest price per square foot possible.

    On a side note, CMHC backed loans are sold off to institutional investors.

    1. Ed Wishart

      at 8:53 pm

      On your side note. This is real and I suspect that the “Canadian Infrastructure Bank” owned by trudeau, Morneau and other cabinet members, is going to have it’s hand in there big time. Strange how this was the “first item of business” after the election, a “bank for the rich” (as trudeau said it). It finances SNC Lavalin and that scandal, why would it not be right in the middle of this????? Now right before election those clowns bring in this scheme, methinks for their own bank to daw in the rewards.

    1. Appraiser

      at 1:31 pm

      P.S.

      See mortgage delinquencies over past 20 years USA v. Canada (BMO Chart)

      1. Depraiser

        at 2:05 pm

        Yawn. Amateur.

      2. Housing Bear

        at 2:54 pm

        Great chart Appraiser. Isn’t in interesting that the US delinquency rates didn’t really begin to shoot up until 2 years after (2006) their housing bubble had peaked?

        Also find it interesting that delinquency rate peaked 2 years before their market hit bottom (2012)

        Guess it kind of makes sense considering who in their right mind would ever default in a rising price environment……… If you over stretched to buy you just sell for a profit and walk away.

  9. Stephen

    at 2:18 pm

    When you say the government has tried to slow down the market for the last two years, I would point out that the main tools used to cool down the market were implemented by provincial governments in ON + BC, the BOC raising interest rates, and OFSI (technically supposed to be independent) – so I would disagree that this specific Liberal government has tried to slow the market.

    And yes I think you’re making a huge leap with the Fannie/Freddie comparison – and this leading to a housing meltdown like in the US. The main issue in the US was the subprime mortgage market which is not what we have in Canada.

    I see this as targeting smaller cities and towns where housing prices are far lower than Vancouver + Toronto.

  10. Chris

    at 4:16 pm

    It’s looking like this shared equity program may actually reduce the maximum purchase price:

    “Based on our math and reading the announcement literally, a couple making $119,999 (the income limit under the program), putting down 5% and getting a 5% “incentive (loan)” from CMHC can only qualify for a $490,844 purchase price.

    If that same couple got a regular old insured mortgage, they could qualify for much more — up to a $557,413 home — without the government taking any piece of their future price appreciation.”

    https://www.ratespy.com/first-time-home-buyer-incentive-03208628

    In addition, others are voicing concerns that these measures may delay demand until the Fall, when they are expected to be implemented. With sales volumes already low, kicking demand to a later date is an interesting strategy.

    1. Whaaa?

      at 7:33 pm

      Great find, Chris. Fortunately there are people out there carefully studying policy/proposals (aka doing the math) as opposed to foam-at-the-mouthers like, all too often, David.

      1. Chris

        at 10:58 am

        The math is interesting, though I’m still waiting to see if buyers can put down a larger down payment and still take advantage of this program. If a buyer could put down 14.99%, then get 5% from CMHC, their purchasing power would be higher.

        The proposal is a bit sparse on details, so makes it tough to fully assess the impact this might have if it comes into force,

    2. Chris

      at 12:58 pm

      “As for the housing market impact of Budget 2019, expect some turbulence in the coming months. First-time home buyer activity is poised to slow down between now and September 2019 (the launch of CMHC’s first-time home buyer incentive program), as many house-hunting millennials await more details and crunch their numbers. This could depress the market even further during that period.” – RBC Economic Research

      Looks like we can expect sales volumes to tumble further.

  11. Clifford

    at 6:46 am

    I expected the Libs to buy votes and they did not disappoint. A band aid solution to a big problem.

    Will be voting blue. Time to end this nonsense.

    1. Love Tractor

      at 8:35 am

      And the Scheer gang will do what exactly to solve this “big problem “? Surely they won’t put something half-baked out there simply to “buy votes,” will they?

  12. Chris

    at 10:55 am

    Remember when some on this blog were arguing against measures to help combat money laundering through real estate?

    “Toronto’s real-estate market welcomes criminals, giving them an easy way to invest dirty money and driving up housing prices for regular people, according to a report published today by Transparency International Canada…

    Transparency International Canada studied all residential property transactions in the GTA since 2008 and discovered more than $20 billion in anonymous money entered the real estate market without any oversight or due diligence…

    A Star investigation published last year revealed that Canadian real-estate agents submitted suspicious transaction reports in less than 0.008 per cent of property sales made between 2013 and 2017.”

    https://www.thestar.com/news/canada/2019/03/21/dirty-money-is-driving-up-toronto-real-estate-prices-report-says.html

    1. Reality Bites

      at 1:34 pm

      Posted in the Toronto Star, a left leaning publication if they ever was one. Their “Metro” subway rag basically blames market appreciation on money laundering. Renter-readers and housing bears will eat that up. Bring on the market crash!

      1. Chris

        at 2:06 pm

        So, you’re disregarding the report prepared by Transparency International Canada, because the Toronto Star wrote an article on the topic, and you consider that newspaper too left leaning?

        Is BNN Bloomberg too left leaning as well?

        https://www.bnnbloomberg.ca/toronto-housing-is-a-magnet-for-money-launderers-study-says-1.1232605

        It also says nothing about bringing on a housing crash. The report is highlighting the deficiencies in our approach to preventing money laundering, and recommending solutions.

        This is not a real estate bull vs. bear issue. If you’re in favour of money laundering, you’re in favour of criminal activity, and you’re in the wrong, full stop.

      2. FreeMoney

        at 2:19 pm

        “…a left leaning publication if ever there was one…”?

        The Toronto Star? Wow, you don’t get out much, do you? Even the (hardly Marxist/Leninist) Guardian is further to the left than the tamely “liberal” Star. Geez, you sound like Bill O’Reilly when he called the Globe & Mail (yes, the Globe & Mail) “the Havana News.” True leftist publications (thin on the ground, sadly) would apparently make your head explode.

        1. Chris

          at 2:54 pm

          Whether it was The Havana News or Rebel Media reporting on it, it doesn’t inherently make the research conducted by Transparency International Canada false.

          Reality Bites’ attempted discrediting of the report’s findings on the basis of who is covering the story is nonsensical.

    2. Alexander

      at 6:11 pm

      Really fishy publication if I ever see one. 50% of supply is purchased by corporations? Where did they get those numbers from? It is so off that I am not interested to comment.

      1. Chris

        at 9:34 pm

        “Where did they get those numbers from?”

        Did you try checking the Methodology section of the report?

        “We analyzed more than 1.4 million residential property transactions in the GTA dating back to 2008. Comparing purchases by corporate entities to purchases by individuals, we looked for trends over time, across municipalities and by purchase price…The data for this study was provided by Teranet, which holds an exclusive licence to administer Ontario land title records.”

        http://www.transparencycanada.ca/wp-content/uploads/2019/03/BOT-GTA-Report-WEB-copy.pdf

        “50% of supply is purchased by corporations?”

        Where are you finding that 50% of supply is purchased by corporations? Are you misunderstanding one of the two following quotes:

        “Nearly 50% of those unregulated mortgages were issued to corporate buyers, despite corporate purchases accounting for less than 4% of total transactions.”

        Or:

        “But 54 per cent of homes purchased for $7 million — $10 million are owned through a company.” (from the Toronto Star article)

        “Really fishy publication if I ever see one”

        The report produced by the Canadian division of the global anti-corruption coalition, Transparency International, seems “fishy” to you? And their numbers seem “so off”? And yet you’re “not interested” in commenting further.

        Not exactly a compelling argument…

  13. Mounur

    at 10:28 pm

    Well said.

  14. Karen Crozier

    at 12:53 pm

    Your argument seems to be that gov. is taking an unjustified risk by making all taxpayers, in effect, lenders, to a small group who can barely afford to get into the market. A valid concern, but government is now faced with the prospect of future dependency in the future from chronic renters unable to stabilize their finances. Over their lifetimes, these renters will expend nearly all of their resources to live at far greater cost, in what is often inadequate and even substandard housing, greatly limiting and even harming their lives.

    I would prefer that a non-governmental non-profit took on this tole, perhaps by offering early entry into an equity-building co-op or even standard real estate purchase in return for greater payment later on, but we have to get more people into the home buying marketplace..

    I hope you might agree that for those locked out of the market, an extended payment bargain is a better bargain that remaining locked out. It is especially so when you consider that over a 30-year span, any assets they have will multiply in value with little effort on their part and still provide financial security, even with a longer payback time built in.

    We also have a social justice argument which says the disadvantaged should not suffer their entire lives merely because of poor health, childhood abuse, learning disabilities, lack of access to competent mental health services, lack of a down payment, or lack of earning capacity in light of the above. Added to this, nearly half of the population now subsists on low wages, and, in the near future, technology is poised to replace half of all employment at every level of society.

    Over time, rents are always higher than principle, interest and mortgage costs. Further, the poor generally have the capacity to cover housing costs. All of society will benefit when home ownership rates are kept high, as home owners have far more disposable income and can generate economic growth in the economy. Renters under duress have no funds to spend, and in fact their spending declines, causing economic constriction.

    The challenge is to create that ideal economic structure to help young adults purchase in
    their early 20s. To my mind purchasing all or even part of an efficiency unit to live in while attending university, or after leaving home, makes the most sense, if we can enable this modest toehold in the market, and make it widely available.the home ownership conundrum may be successfully solved, and future poverty and government dependence eliminated.

    1. Karen Crozier

      at 12:56 pm

      sorry, I meant “task” in para 2, not ‘tole’
      kc

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