The federal budget released March 19 was supposed to address the issue of housing, which for many people in urban B.C. (including Surrey and White Rock), has become a critical matter. It sort of did so.
The government has come up with two ideas which will help a few people to buy homes, but could leave them further behind in other ways. One is to, in effect, put Canada Mortgage and Housing Corporation on the title. CMHC will provide some interest-free funds for a mortgage for first-time buyers with an annual household income below $120,000. This would act as an additional down-payment, but must be repaid when the home is sold.
Sounds good – but a recent report stated that the annual income needed to pay down a mortgage in the Metro Vancouver area is $211,000.
While the homeowners may gain some equity if the value of the home goes up and they have paid down a good portion of the mortgage, there is a possibility that the value of the home could decrease. Housing prices do not always rise. If they fall, buyers who take out the CMHC mortgage will be even further behind.
The other idea is to allow first-time buyers to take more money out of their existing Registered Retirement Savings plans and use that for a house down payment. The government won’t charge them tax on the withdrawal, as is currently the case. However, those people will have now have quite a bit less in their RRSPs. They will likely be even more poorly prepared for retirement than many are already.
A subsidized interest program to spur construction of rental projects has also been extended. Other than that, there wasn’t much of a sense of urgency on building social housing – subsidized rental units, co-ops and other forms – for the increasing number of people who cannot even dream of owning a home. The federal government has promised money for such types of housing, but it is very slowly trickling out of Ottawa.
What’s also missing is any change in rules for the mortgage stress test, imposed by CMHC in January, 2018. It has kept many people out of the market, and has forced a significant number to downsize because the banks won’t renew their mortgages. It was supposed to ease concerns about too much debt, but recent figures show household debt is rising anyway. Many in the real estate community blame the stress test for seriously limiting the flow of buyers.
Also missing is pressure on provincial and local governments to move more quickly in approving housing projects. Ottawa has the ability to apply pressure – it has more fiscal clout than any other government. It has issued a “housing supply challenge,” but that sounds more like a carnival game than a program leading to meaningful changes.
Anne McMullin, president of the Urban Development Institute’s Pacific region, noted last week that it can take as long as eight years from when a housing project is first proposed until it is ready for occupancy. That is unacceptable.
McMullin also noted, in a pre-budget interview, that federal incentives to build rental housing stock would help ease the very low vacancy rate by leading to more rental stock being built. The extended subsidies will help, but the slow pace of approvals means that help will be a long time coming.
Another missing piece was a pledge to restrict foreign ownership, or at the very least, tax owners of homes who are not resident in Canada. There was a vague promise to boost tax compliance.
Most Surrey residents have assumed foreign ownership was more of a problem in Vancouver, Richmond or Burnaby. In fact, newly-released information from CMHC shows that 20.5 per cent of condo units built in Surrey over the past decade have at least one non-resident owner. These owners do not pay taxes in Canada and their overweight presence in the Metro Vancouver housing market is one of the prime reasons that house prices, for both owners and tenants, are so high.
People with concerns about housing issues, whose numbers are growing daily, , whose numbers are growing daily, likely are skeptical about whether any of these proposed changes will truly ease housing shortages, sale prices or rents.
Frank Bucholtz writes Wednesdays for Peace Arch News, as well as at frankbucholtz.blogspot.ca