Week after week we get new announcements from both the provincial and federal governments about new initiatives to fix our housing problem. (Could there be an election on the horizon?)
The Federal fall financial update (mini budget) tabled last week had a range of financial incentives to address the problem. The largest was a new $15 Billion (that’s right, with a “B”) loan investment fund to build 30,000 new homes. But it only goes into effect in the 2025-26 fiscal year, about the same time they will no longer be government if the current polls are to be believed.
Okay, there’s also $1 billion for next year, to help construct 7,000 new homes. And they added $309 million for co-op housing development for 2024. If $1 Billion builds 7000 homes ($142,857 per home), then $309 million should add another 2163 homes. (But why does $15B build only 30,000 homes; that’s $500,000 per home?)
How much will all that money ameliorate our housing supply problem? Consider: This same government is projecting admitting about a half million new immigrants to Canada next year. You do the math. (Okay, I will.) If, for example, five members of an immigrant family inhabit one living unit (that’s more than the current household average, but I’m assuming new immigrants will have more than the average household tally), then those immigrant family units alone will need 100,000 living units in addition to the current shortage.
By the 2025-2026 fiscal year, when the $15B kicks in, that will have grown to 200,000.
Okay, building new housing units (mostly apartments, one presumes) is only one initiative in addressing the problem. The other is to free up more of the existing units for rental housing, the assumption being that there are many currently unavailable.
So, our provincial government that had previously declared all strata properties to become rentable (putting downward pressure on rates but not expanding rental stock), and had decreed all residential zones to allow authorized suites, and had legislated a Speculation and Vacancy tax on properties that were left uninhabited in the major centres, last week expanded that Speculation and Vacancy tax to include thirteen more communities. They claim that the tax has already returned more than 20,000 properties in metro Vancouver to the rental pool since the tax was introduced there in 2018.
Another initiative is to restrict short-term rentals, such as Air BnB’s, which governments say takes housing units away from long-term local renters, as well as inflates the cost of renting. BC got into the act first (See my analysis of that initiative in my October 18 post), and now the federal government is following suit in its fall economic statement, promising $50 million over three years to support municipalities in cracking down on short-term rentals.
They also propose to deny income tax deductions on short-term rental operators who don’t comply with provincial and municipal regulations.
The feds also threw in a few smaller measures: a rebate of the GST on new co-op housing projects intended for long-term rentals, and a mortgage charter that, among other things, would eliminate the need for borrowers to again pass the onerous stress test when switching to a new lender when renewing their mortgage.
All of this should help some.
It provides some incentive for the building of new housing stock, it frees up some rental units that have not been available for long-term rentals, it puts a little downward pressure on rental rates, and it may save a few property owners from losing their properties when their mortgage comes up for renewal at much higher rates than when they obtained them.
But it will take a lot more than these initiatives to provide affordable housing for all. And almost all are aimed at expanding rental opportunities. The expectation of a single-family home with a yard for a young family that was once considered almost a right of passage, has long faded. That dream will not be recovered through these measures.
But, if more families can get into three-bedroom apartments from the current two-bedroom ones they now qualify for, and if more couples get into two-bedroom apartments than the one-bedroom ones they now qualify for, and if more families stay in living units together because they are now allowed to have their kids (or their parents) live with them in suites in the houses they already own, and if more owners are relieved of the financial burdens they face because they don’t have to re-pass their mortgage stress test and because they can get some extra income by developing their basements into suites, and if more people are removed from their street tents to live in the one bedroom suites vacated by those moving up to the two-bedroom suites, then we will have gained at least a little relief in the tight housing market.
There will be unintended consequences, to be sure, such as fewer investors and landlords willing to remain such if they can’t get an adequate return on their investments.
And we should not expect a massive drop in housing prices as a result. Afterall, the new housing stock incentivized by these policies is just a fraction of the total needed, and most of it is years away. The market will still keep housing prices high.
But maybe not quite as high as otherwise.
At least, that’s how I see it . . .
(P.S. – we do rent 2 owns in strata complexes, as well. Even there, for most people, it’s better to be an owner than a renter.)