Feds eye options to assist young homebuyers in coming fiscal plan
Government land could be used for housing
Housing will be the focus of Canada’s forthcoming budget, with Finance Minister Chrystia Freeland emphasizing measures to speed up construction and boost the supply of affordable homes — possibly using government land to do it.
The budget, which is still being drafted before its April 16 release, is likely to include a strategy for building homes on government-owned property, according to housing experts who spoke with Bloomberg. Freeland’s options include a program that would offer long-term, cheap leases to developers of affordable housing projects and setting up a fund to buy provincial and municipal land for the same purpose.
Another idea that’s being floated in Ottawa policy circles involves the use of temporary tax incentives to nudge real estate investors to sell buildings to non-profit housing organizations, with the goal of creating a larger number of cheaper homes to rent out of the existing supply. The government may also consider tax credits to investors who provide capital for affordable housing projects, similar to a long-standing program in the United States.
“They’ve got to find a way to unlock private capital,” said Tim Richter, president of the Canadian Alliance to End Homelessness, who has given presentations on housing policy to members of Prime Minister Justin Trudeau’s cabinet twice in the past year. “This is a multi-trillion-dollar problem. The federal government and provinces together can’t solve it on their own.”
Trudeau and Freeland are under enormous pressure to quell anger about housing and the cost of living, which have moved to the top of the political agenda, ahead of an election in 2025.
Housing costs are one reason the governing Liberal party’s polling numbers have cratered among younger voters — a demographic that was crucial to elevating Trudeau to the prime minister’s job. Polling from Abacus Data suggests that 25 per cent of people aged 18 to 35 support the Liberals, compared with 40 per cent in the 2015 election in which he won power. Conservative Leader Pierre Poilievre has seized the initiative, and a huge lead in opinion polls, with promises that he would force local governments to remove obstacles to faster home construction.
The federal housing agency, Canada Mortgage and Housing Corp., estimated last year that 1.7 million new housing units would be built by 2030. That’s nowhere near enough to accommodate a rapidly growing population: CMHC has estimated it would take a further 3.5 million homes on top of that to “restore affordability.”
The government is looking at options to help young homebuyers. Housing Minister Sean Fraser told reporters this week the budget will “address the very real challenges that disproportionately impact the generation of young Canadians who have a difficult time affording a place to rent, or envisioning that they may one day achieve the dream of home ownership.”
Some experts have been pushing Freeland to ease the mortgage rules for younger people so they can better access the housing market. Currently, buyers whose down payment is less than 20 per cent of the home’s price are capped at 25-year mortgage amortizations.
“Why do we tell a 35-yearold that they have to have their home paid off by the time they’re 60?” said Mike Moffatt, a policy director at the Smart Prosperity Institute and a former Trudeau economic adviser.
“It’s just overkill,” he said. “If you came up with a set of mortgage qualification rules specifically for young firsttime homebuyers, I think you’d be able to change the calculus a little bit and allow them to outbid some of the investor speculators.” Moffatt, too, has given presentations to Trudeau’s cabinet on housing policy.
Allowing longer mortgages for younger buyers would have a limited effect on home prices, he argued, and it wouldn’t cost the federal treasury anything.
Still, Richter said he expects the budget to include some cash transfers to low-income people to help them cope with climbing rents.
“In the short term, that is the only tool governments have to really support people when the rent is increasing 20 per cent a year, and keep people in their homes,” he said.