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The background
Housing prices have surged across Canada since the pandemic started, as interest rates dropped and remote work encouraged city-dwellers to buy homes in smaller communities where prices have traditionally been much lower. The average price of a home in Canada surpassed $716,000 in March 2021, and while it has since receded, average prices for the year ending in July were still 22 per cent higher than in the previous year.
Rental costs have also been increasing. In some cities, the lack of affordable housing has been thrust into the spotlight by housing encampments in public parks, which in places like Toronto and Halifax have been forcibly removed by the police.
Although many of the policy levers reside with municipal governments through zoning and other regulations, the federal government does have a role to play. Over the past decade, most of the attention has focused on mortgage rules, helping people afford down payments and disincentives for foreign buyers. These measures have done little to slow the steady rise of housing costs — and sometimes have even been counter-productive, juicing up prices and demand.
The cost of housing has become onerous for many Canadians. Increasingly, the policy debate is focused on supply issues: How do we incentivize more rapid construction of more housing — housing for purchase, purpose-built rental housing and subsidized affordable housing?
Where the parties stand
Conservative Party:
- Build one million homes in the next three years
- Require municipalities receiving federal funding for public transit to increase density near the funded transit
- Release at least 15 per cent of the federal government’s real estate stock for housing
- Incentivize developers to create rental housing by deferring their capital gains tax if they reinvest in rental housing
- Explore converting empty office space into housing
- Encourage a new market in seven- to ten-year mortgages and reduce the need for mortgage stress tests
- Increase the limit on eligibility for mortgage insurance and index it to home price inflation, allowing those in high-priced areas to buy a home with less than a 20 per cent down payment
- Ban foreign investors from buying homes in Canada for at least two years
Liberal Party:
- Build, preserve or repair 1.4 million homes in the next four years
- Create a Housing Accelerator Fund to provide $4 billion to help cities accelerate their housing plans, with a target of 100,000 new middle-class homes by 2024-25
- Build and repair more affordable housing by increasing funding to the National Housing Co-investment fund for a total of $2.7 billion over four years
- Convert empty office space into housing
- Commit $1 billion in loans and grants for rent-to-own housing projects
- Introduce a tax-free First Home Savings Account, which will allow Canadians under 40 to save up to $40,000 toward their first home
- Stop “renovictions” by deterring rent increases that fall outside of a normal change in rent
- Introduce a Home Buyers’ Bill of Rights that will ban blind bidding and establish a legal right to a home inspection
- Ban new foreign ownership of Canadian houses for the next two years
NDP:
- Create at least 500,000 units of affordable housing in the next 10 years, half of that within five years
- Set up dedicated fast-start funds to streamline the application process for funding for co-ops, social and non-profit housing
- Waive the GST on the construction of new affordable rental units
- Re-introduce 30-year terms to CMHC-insured mortgages for first-time home buyers, allowing for smaller monthly payments
- Double the Home Buyer’s Tax Credit to $1,500
- Introduce a 20 per cent foreign buyer’s tax on home sales
Green Party: While the party’s housing platform has not been released yet, the party has called for more affordable housing, more funding for co-op and supportive housing, and provincial eviction freezes and rent freezes.
The reaction
Wilfrid Laurier University researcher Laura Pin, who specializes in housing and inequality, poses a key question about the parties’ housing platforms: “Who gets to define affordability?” Indeed, discussion of the parties’ housing promises often conflates two important but distinct concerns — helping prospective home-buyers enter the real estate market, and helping Canada’s lowest-income residents secure safe rental housing.
The latter is what’s typically meant by “affordable housing:” rental units built with some government funding, which are then rented out at below-market rates. The standard definition of “affordable” in this context is 30 per cent of the median income of tenants. But there are several reasons why even these units may not be truly affordable for low-income renters, as Ricardo Tranjan of the Canadian Centre for Policy Alternatives explains.
It’s also important to remember that housing precarity doesn’t affect all groups equally. For instance, one in 15 Indigenous people is estimated to have experienced homelessness in their lives, compared with one out of 128 in Canada’s general population. Margaret Pfoh, CEO of the Aboriginal Housing Management Association, told the CBC she would like to see an Indigenous housing strategy.
Policy experts FPR spoke to were concerned that the parties’ commitments weren’t specific enough to protect and expand the pool of affordable housing. Diana Chan McNally of the Toronto Drop-In Network raised concerns with the Conservatives’ proposal to incentivize developers to create rental housing:
“In essence, this is incentivizing the creation of private market rental rental housing, with no guarantees on affordability. More likely, we will see the owners of properties with declining asset values be incentivized to create profitable rental housing marketed at above average market rents, which will be inaccessible to those most in need: low-income renters and people who are unhoused.
Housing created under this platform does nothing to address the continued financialization of Canada’s housing market, which is the root of the problem, and will leave those most in need of sustainable, healthy, accessible and affordable housing – renters – out in the cold.”
Pin took notice of the Liberals’ proposed GST rebate and tax incentives for developing new affordable housing:
A collective from the More Neighbours Toronto housing advocacy network found it positive that all three major parties recognized the need to increase housing supply, but noted that for many proposals, the “devil is in the details:”
“The NDP’s plan to build 500,000 units of affordable housing is laudable and will ensure our communities retain a mixed income character as (market) prices become unattainable. However, their inattention to improving the affordability of market housing and absence of proposals to increase market supply is a red flag.”
The Liberals’ plan to help cities fund more affordable housing units was welcomed by groups such as the Federation of Canadian Municipalities. However, in some cases, the dearth of new affordable units comes down to municipal regulatory processes, not funding, as Mike Moffatt of the Smart Prosperity Institute wrote in a Twitter thread:
Likewise, More Neighbours cautioned that cities’ exclusionary zoning laws may discourage higher-density housing.
Paul Kershaw of Generation Squeeze says there is a link between rental affordability and home sales, because lowering home prices will help lower costs across the market. He says the key to affordability for home-buyers is not just to lower prices but to keep them low:
“It’s great the major parties have made housing affordability a top issue, acknowledging a “crisis” because the housing system is “stacked against younger Canadians.” But amid all the promises the parties are making, many of which are important and supported by evidence, they are dodging the key question: What do they plan (to stall) home prices going forward? (Without this) we won’t restore affordability for all, because wages won’t have a chance to catch up.”
Analysts also cautioned that making it easier to buy homes — for instance, through increasing the first-time home buyers’ tax credit, extending mortgage terms or easing the rules around mortgage stress tests — without adding more housing stock has the potential to drive prices up even further.
It’s also unclear whether restrictions on foreign ownership will make much of a difference. Writing in the Financial Post, Ryerson University professor Murtaza Haider and real estate professional Stephen Moranis note that in two cities where this question has been frequently raised, Toronto and Vancouver, less than five per cent of homes are owned by non-residents — a figure we can be expect would be far lower elsewhere in Canada. They also say that housing prices soared during the pandemic when international travel and capital flows were down. “Blaming foreign buyers for housing price escalation is, to some extent, scapegoating,” they write.
Indeed, there is only so much governments can do in the face of market forces, as Canadians who already own a home — and see it as their main investment — don’t want to lose the value they’ve gained in recent years. “Once you add supply to the market, the price and everything comes down, and that’s not popular,” University of Cambridge economist John Rapley told the CBC.
