Homebuilders group pushing for 30-year mortgages to boost construction in Canada
, The Canadian Press
The group that represents residential builders in Canada wants Ottawa to offer a 30-year amortization period for insured mortgages on new homes.
The Canadian Home Builders' Association says extending the period an additional five years would help with affordability and spur more construction.
The move would bring more first-time homebuyers into the market, in turn encouraging developers to build more homes, association CEO Kevin Lee told a news conference Thursday.
"Canadians would love to buy homes. The problem is they can't afford to buy homes and can't access mortgages that would enable them to buy homes," Lee said.
"And if we don't have people able to purchase, then builders aren't able to go ahead and build those homes."
The proposal is one of several recommendations made by the association in a new report that lays out ways policymakers can help the industry build more homes.
Housing expert Mike Moffatt said he likes some of the recommendations made by the group, including setting up an investment tax credit to support productivity growth in the sector.
But offering a longer mortgage risks boosting demand without addressing the core issues behind the shortage, he said.
"I don't think it's particularly harmful. But I also don't think it's particularly helpful either," Moffatt said in an interview.
The Canadian Mortgage and Housing Corp. estimates the country needs to build 5.8 million homes by 2030 to restore housing affordability.
Canada's housing shortage has worsened amid strong population growth, which in turn has put more pressure on governments to tackle the affordability crisis.
The Liberal government has been under intense scrutiny for the erosion of housing affordability, with Conservative Leader Pierre Poilievre pinning the blame squarely on the prime minister.
Housing Minister Sean Fraser has conceded that Canada won't be able to significantly ramp up home construction without innovation.
The federal government is hoping to boost productivity and speed up construction with modular homebuilding — dwellings that are built in a factory setting and assembled on-site.
In the fall, Fraser said the federal government would launch a catalogue of pre-approved home designs that would speed up the permitting process and incentivize more factory-built homes.
About a quarter of homebuilders are using some form of factory-based construction, but there's still plenty of room to grow the technology, Lee said.
The association wants a refundable tax credit equal to 30 per cent of investment in machinery and equipment, similar to the investment tax credit created for clean technologies.
A strategy similar to what the government has done to boost the development green economy makes sense, Moffatt said.
"I think that could be exceptionally useful, because we're not going to be able to to scale up homebuilding just by doing more of the same."
The federal government is currently working on a housing plan that Fraser has suggested would be out in the coming months.
That plan is expected to build on the housing policies the Liberals have already announced, including the elimination of GST charges on new developments.
This report by The Canadian Press was first published Feb. 8, 2024.
Extension of foreign homebuyers ban 'xenophobic,' won't help housing: experts
, BNN Bloomberg
Feb 6, 2024
Experts say Canada’s extension of the foreign homebuyers ban will do little to quell the housing crunch the country is facing.
The federal government announced last week that it would extend the ban on foreign home buyers for another two years in a bid to help with soaring housing costs in Canada, particularly in Toronto and Vancouver.
“By extending the foreign buyer ban, we will ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class,” Finance Minister Chrystia Freeland said in a statement Sunday.
The measure was first enacted in 2022 with an expiration date of Jan. 1, 2025, but it will now expire on Jan. 1, 2027.
Derek Holt, vice-president and head of capital markets economics at Scotiabank, criticized the extension in a note to clients on Monday.
“It’s a purely xenophobic measure aimed at politically scapegoating foreign buyers that were an immaterial share of home purchases,” he wrote.
“It is designed to politically blame foreign buyers for what is instead the total mismanagement of Canadian housing and immigration policy. Besides, ultra-loose immigration policy, including abuse of the temporary category particularly via international students, resulted in finding other ways of funnelling money from outside of Canada into local housing.”
Christopher Alexander, president of RE/MAX Canada, said he was “surprised” to hear of the extension and called it a “smokescreen” that’s masking other affordability issues in Canada.
“It's been in place for over a year now and it hasn't really contributed to a decline or improved affordability,” he said in a phone interview on Tuesday.
“It's almost insulting to think that the federal government believes that this is going to really help move the needle.”
Alexander said foreign homebuyers only represent about four per cent of home purchases in Canada. He would rather see governments focus on further cutting taxation for new builds.
“We have to build 3.5 million homes in the next eight years and between municipal provincial and federal government taxes and levies, we're looking at almost 30 per cent in some jurisdictions of the overall cost of a unit going to the government,” he said.
Alexander was referring to a 2023 study from the Canada Mortgage and Housing Corporation that found Canada needs to add 3.5 million new homes by 2030 – on top of those already planned – to achieve affordability in the country.
Taxation has been a focus of the federal government’s housing policy, having cut the GST on new rental builds, a move that Ontario later followed.
Thomas Davidoff, director of the University of British Columbia’s Centre for Urban Economics and Real Estate, believes cracking down on vacant homes, regardless of who owns them, is a better policy.
“Going after foreign buyers is pretty good politics. At the level of policy, I don't think it probably has much impact,” he told BNNBloomberg.ca in a phone interview on Monday.
“My general view is it is the use of the property that matters, not the nationality of the owner. So, an empty home owned by a Canadian is worse for affordability than a home rented out to a local, by somebody from overseas.”
Davidoff said an effective policy would also target people who own property in Canada, but don’t pay any income tax in Canada.
“I have shown that there are a huge number of people who own very expensive homes and pay next to nothing in income tax,” he said. “Because Canada is a low property tax country and high income and sales tax, our tax system invites people, whether they're residents of Canada or not, to buy real estate, but not necessarily make a living here.”
If properties were taxed at one per cent of their value, but made every dollar an income tax credit, it would raise an estimated $2 billion in taxes for Toronto and Vancouver, Davidoff said.
“That's real money and you'd probably free up some housing for the local workforce,” he said.
Karen Yolevski, COO of Royal LePage Real Estate Services, noted that housing prices in Canada have only climbed since the foreign homebuyers ban was first enacted, suggesting it’s had little impact on real estate in the country.
“Non-Canadian property ownership makes up a small percentage of the overall housing market, therefore a ban on such ownership is not likely to improve access to housing in a material way,” she wrote in a statement.
“Given the imbalance between available inventory and buyer demand, the best way to solve Canada’s housing crisis is to significantly increase supply.”
According to the Canadian Real Estate Association, the average price of a home in Canada climbed to $657,145 in December 2023.
With files from Bloomberg News
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