FIXER UPPER
The three major parties’ platforms try to repair Canada’s housing woes using similar tools.
Housing affordability is fast emerging as a major election issue and one that might just influence the outcome as the parties try to improving the country’s unbridled growth in housing prices and rents.
Canadians cannot be blamed for wondering how a land-rich country has become so poor at developing land. With more than 270 square kilometres of land for every 1,000 Canadians, Canada is at least nine times as land-rich per capita as the United States. Yet, housing prices and rents are far less in the U.S. than they are here.
We have scoured through the housing platforms of the Conservatives, Liberals and NDP, the three leading contenders, to see whose platform offers realistic and implementable solutions that could make a meaningful difference in approving housing market outcomes for middle- and low-income Canadians.
We found the political platforms to be similar in their three-pronged approach: blame foreign homebuyers for our housing woes, encourage first-time homebuyers by offering rebates and subsidies, and motivate the construction of new homes above levels we have observed in the recent past.
The Liberals and Conservatives would like to ban foreigners from buying residential properties in Canada for at least two years. The NDP proposes a 20-per-cent tax on foreign homebuyers. But blaming foreign buyers for housing price escalation is, to some extent, scapegoating.
Data on homebuyer nationality is not readily available, but Statistics Canada in 2017 reported that even in the coveted housing markets of Toronto and Vancouver, fewer than five per cent of the homes were owned by non-residents of Canada, some of whom were Canadian nationals living abroad.
The unprecedented growth in housing prices across the country during the pandemic, when international travel and the flow of capital were noticeably lower, suggests the primary determinants of housing demand are domestic rather than foreign. Hence, subjecting foreign buyers to a ban or additional taxes is unlikely to harm Canadian housing markets, so such measures are limited in their ability to offer meaningful relief.
At the same time, measures to improve transparency by developing a registry of beneficial ownership is an urgently needed measure that enjoys unanimous support from the three leading parties.
First-time homebuyers (FTHB), often comprising younger cohorts who are a rapidly growing block of voters, are the targeted beneficiaries of numerous initiatives that offer subsidies, tax rebates and other concessions to help with home purchases.
For example, the Liberals have a rent-to-own initiative, the Conservatives’ plan to lengthen mortgage terms to seven to 10 years, and the NDP proposal to double the
Home Buyer’s Tax Credit to $1,500. Some measures might not profoundly enhance affordability, but other initiatives, such as the Liberal’s First Home Savings Account to permit young Canadians to save up to $40,000 tax-free, could make a significant difference for young homebuyers.
Such measures are designed to assist otherwise disadvantaged young homebuyers with limited access to equity or none at all, but these initiatives will also boost demand and exert additional pressure on housing prices, thus making matters difficult for those who would not benefit from them.
To a varying degree, the three parties recognize the need to build new housing in Canada. The population-adjusted housing construction rate has recently declined to 6,000 housing starts per million people, from 12,000 in the early 1970s.
Despite the drastic decline
in new housing construction over the past five decades, the measures to increase the rate of construction leave much to be desired. The Conservative platform promises a million new homes in three years, which roughly translates into 80,000 additional dwellings each year above and beyond what is likely to be built if the status quo prevails.
The Liberals promise to “build, preserve, or repair 1.4 million homes in the next four years.” It claims the plan will deliver 30 per cent more homes than the Conservatives’ plan will. Regrettably, the Liberal claim is political jugglery at best.
The Liberals have squeezed 300,000 additional new homes into its platform by stretching the timeline to four years, while the Conservatives have a three-year plan. Essentially, the Liberal and Conservative platforms are promising about the same number of new homes.
The NDP promises “500,000 units of quality, affordable housing in the next 10 years, with half of that done within five years.” However, it is not clear whether that number is on top of what would have been built under the status quo. Still, the commitment to build affordable housing at the rate of 50,000 homes per year is an admirable distinction of the NDP platform.
We have found measures equally worth praising in the Liberal and Conservative platforms. For example, the Conservatives promise to defer the capital gains tax if the proceeds from the sale of a rental property are reinvested in rental housing. This will likely stimulate rental housing construction, which nosedived after the implementation of the tax in the early 1970s.
The Liberal plan to outlaw blind bidding — where buyers bid against each other without knowing what others have bid — is a welcome step to improve transparency. The technology already exists to protect the identity of bidders while making the bid amounts transparent. Such a measure is likely to remove the asymmetry of information between buyers and sellers.
Missing from all the announcements are bold measures needed to improve shelter alternatives for those households who may no longer be able to afford market rents, either because of their health or other circumstances. The never-exhausted waiting list for social housing in the biggest cities suggests that the stock of public housing, or dwellings with rent geared to income, needs to be increased many times over. Tinkering at the margins will not help those priced out of even the cheapest rental markets.
The housing initiatives outlined in the three platforms are modest in ambition, average in imagination and limited in their ability to offer fast relief. Some measures will increase demand even further and the supply-side initiatives are just too timid to make a meaningful impact in the next few years.
Anyone hoping for a quick fix to their housing troubles will regrettably have to realize the next few years are likely to be more of the same.