Affordable housing goals hang in balance

Bank of Canada says federal efforts to cool markets have lowered housing costs

OTTAWA — The tenuous balancing act facing the federal government’s $40-billion housing strategy has come into clearer focus as a top Bank of Canada official warned of the challenges between ensuring economic stability and helping those in housing need.

The central bank’s second-incommand told a national housing conference Thursday that the country will eventually face a point where certain decisions will need to be taken to keep the economy going — even though they may dampen efforts to make apartments and homes more affordable.

Bank of Canada deputy governor Carolyn Wilkins, whose appearance at the conference coincided with the first anniversary of the housing strategy’s unveiling, pointed to the central bank’s decision to lower interest rates in 2015 to inject some life into the economy as an example.

The unintended side effect, she said, was increases in housing prices in some of Canada’s biggest cities. As a result, some people took on large mortgages, which led to a rise in household debt, while others were priced out of the market and unable to find accommodations.

“You look at social objectives and financial stability and sometimes you have to trade off,” Wilkins said.

Federal efforts to cool those markets and pump billions of dollars into new affordable housing have lowered housing costs from where they could have been, Wilkins said. The question is whether the policies will continue to work in the future, particularly if the economy goes from boom to bust.

Indebted households have fragile finances and are vulnerable to economic trouble and the Bank of Canada is still concerned about high levels of household debt in Canada — particularly if interest rates rise too fast, too soon.

Central bankers from other countries attending the housing conference noted a cut in interest rates could encourage developers to build new units — but that those new units could end up being high-priced condos or rental properties, which would be little help to those who can’t afford them.

There were also concerns about new government rental regulations and the effect on the quality of apartments.

The national housing strategy aims to build or repair hundreds of thousands of units of affordable or rental housing and eventually create a portable-housing supplement tied to a person rather than a unit.

The national housing strategy is only a few months old, with many parts of the plan having launched in April and more to roll out in the coming months.