At the beginning of the federal election campaign, housing affordability ranked as one of the most important issues that Canadians – especially Millennial Canadians – wanted solved by the next leader of their country. The strategies presented by the Liberals, Conservatives, NDPs and Green Party ranged from extending the amortization period to removing federal taxes believed to be discouraging the construction of rental homes. However, as Greta and gun violence in the US and Canada took the media by storm, the focus shifted from affordable housing to “hotter” issues, namely climate change, health care and gun control.

 

 

Now that the Liberals have won a minority, pundits assert that there’s no question as to if, but only when, we’ll see Trudeau’s commitment to make his first-time home buyer incentive program — in which the government chips in on the down payment — more substantial. This is because a minority government comes with the constant threat of an election. This, in turn, means that all party leaders are in a perpetual “campaign” mode and eager to make good on their more benign promises. What is more, the Liberals and the NDP share similar housing policies, making Trudeau’s promise an easy one to keep. This, coupled with the NDPs who are eager to co-operate and prevent an election they can’t afford, makes it likely that we will see Trudeau’s improved buyer programs roll out over the next few years.

 

While nothing drastic, such as capital gains tax on the sale of a principal residence, will be introduced by the Liberals as they are on their “best behaviour” to prevent an election, it is likely that we will hear more about a vacancy tax (a Liberal proposal) and extension of the foreign buyer tax (a NDP proposal). Efforts, however, by almost all parties will not likely reach the goal of affordability. This is because their policies simply create more demand rather than what we really need – more supply. After all, demand has not shown to be a big issue.

 

In addition to too much attention being placed on demand, other policies further exacerbate the lack of supply, such as government funding for home care that, while necessary, discourages elderly from selling their homes to move in with family or to a retirement home. This disincentive to move (which a capital gains tax on the sale of one’s primary home will simply reinforce) coupled with about 75,000 people (some claim even more) arriving in Toronto annually and over  300,000 more in the nation’s cities will mean that housing prices will continue to rise. Accordingly, what we do need may not be what the new government cares to propose &ndashvernment-built or financed housing and a requirement that municipalities implement a faster process for developers to obtain building approvals. Given the unlikeliness for such drastic measures to occur during the next precarious few years, and assuming that we do not head into a recession, Canadians should expect more of the same – misplaced efforts that create more demand and higher prices.

 

Written by Natalka Falcomer, VP Corporate Development

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