Canada’s housing crisis has quickly emerged as one of the most pressing issues of the federal elections.
After six years in power, Liberal Leader Justin Trudeau is defending his government’s track record on the matter while promising to do more to fix the country’s real estate woes if re-elected. NDP Leader Jagmeet Singh, for his part, has pinned the affordability crisis on Trudeau, blaming the Liberals for meteoric home price increases since 2015.
Conservative Leader Erin O’Toole, for his part, has also put housing squarely at the centre of his campaign, devoting a sizable chunk of his party’s platform to promises aimed at prospective homebuyers and renters.
The Green Party has called for affordable housing for all but has yet to release details on specific policies.
But how credible are the many election pledges to curb the excesses of the housing market? Here’s a look at some of what the Liberals, Conservatives and New Democrats are promising and what experts say might work.
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Tackling the housing shortage
A growing number of housing experts have been flagging housing shortages as a source of soaring prices. As Canada’s population grows, mostly thanks to immigration, and as the large millennial generation hits the home-buying stage, the country hasn’t been adding enough homes, some evidence shows. Here’s what the major parties propose to boost the supply of homes available for both ownership and renting.
- Liberals: “Build, preserve or repair” 1.4 million homes in four years
- Conservatives: Build 1 million homes in three years
- NDP: Build 500,000 affordable homes in 10 years
The campaign’s focus on building more homes is refreshing, says economist Mike Moffatt, senior director at the Smart Prosperity Institute.
“I think the parties are starting to realize that we have a supply-side issue,” he says. “In the past, most of our (federal) policies have been demand-side policies: tax credits to help first-time homebuyers and those sorts of things.”
And by promising to add hundreds of thousands, if not a million homes and more to Canada’s housing stock, Moffatt said federal political leaders seem to be grasping the magnitude of shortage Canada is facing.
Moffatt is also keen on the Liberals’ and the Conservatives’ focus on building market-rate homes, which deviates from the federal government’s traditional focus on affordable housing.
Both Trudeau and O’Toole have also offered delivered credible detail on how the federal government could use policy levers to increase residential construction, something that’s usually in the hands of local authorities.
The Liberals, for example, have pledged a financial carrot worth $4 billion in funding for municipalities that ramp up home building. The Conservatives have similarly promised to tie federal funding for public transit to home-building activity that increases density near the funded transit. The party has also pledged to use at least 15 per cent of the federal government’s real estate portfolio to create new housing.
Those pledges also seem to indicate that both parties have grasped the fact that “it’s not just enough to commit to a level spending. If you don’t have the right regulatory environment in place, you can’t actually get anything built and that money will just sit there,” Moffatt says.
The NDP, on the other hand, has the strongest focus on renting, says David Macdonald, senior economist at the Canadian Centre for Policy Alternatives.
James Laird, co-founder of financial products comparison site Ratehub.ca and president of mortgage brokerage CanWise Financial, concurs.
The party’s promise to add half a million affordable homes is “a great thing for lower-income Canadians struggling to find a nice place to live,” he says.
NDP vows to make housing more affordable in Canada
Financial help for homebuyers and renters
- Liberals: A tax-free savings account to save for a down payment, a rent-to-own program, a 25-per-cent reduction on CMHC’s mortgage insurance rates, raising the home-price cut-off for insured mortgages.
- Conservatives: Changes to the federal mortgage stress test, promoting seven- to 10-year mortgage terms, raising the home-price cut-off for insured mortgages and indexing it to home price inflation
- NDP: Re-introducing 30-year insured mortgages, a $5,000 rental subsidy
While Canada’s federal parties have adopted some bold home-building targets, they aren’t letting go of the tradition to pledge more financial aid for households.
But those promises, when it comes to homeownership, threaten to work against what the parties are trying to achieve by increasing the housing supply, both Moffatt and Macdonald warn.
The issue is that, while adding more homes would relieve pressure on home prices, financial incentives for homebuyers do exactly the opposite, boosting the housing demand and putting pressure on home values.
“In many cases, the platform will push both ways if the pieces are implemented,” Macdonald says.
“The issue that we’re having in Canada is that for so many homes, you have three or four or five bidders all bidding for the same house,” Moffatt says. “So if you give tax credits or you have savings programs to help those bidders make bigger bids in order to win those, well, that’s just going to end up increasing the home price.”
Laird is also wary of the Liberals’ proposal to support rent-to-own programs for new homebuyers, a measure he calls “another complex path to homeownership” along with the First-Time Home Buyer Incentive.
On the other hand, Laird is a fan of the NDP’s proposal to re-introduce 30-year insured mortgages.
“It’s really a better version of the First-Time Home Buyer Incentive, where we reduce the monthly mortgage payment by a little bit simply by allowing young people to pay back the mortgage over 30 years instead of 25 years,” he says.
Canada election: Conservatives pledge to build 1 million affordable homes in 3 years if elected
Protections for homebuyers
The Liberal platform also includes a number of measures to boost protections for homebuyers including:
- Banning blind bidding
- Introducing a legal right to a home inspection
Several housing advocates have called to measures the boost homebuyers’ consumer rights and ban bling bidding, which is often blamed for encouraging more aggressive bids and driving home prices higher.
However, the Liberal platform does not shed light on how the federal government would implement the changes since real estate rules are set at the provincial and territorial level.
It is also unclear whether banning blind bidding would have a significant impact on prices. Australia, for example, does not allow the prices but has still seen breakneck home price growth.
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- Liberals: A two-year ban on foreign buyers
- Conservatives: A two-year ban on foreign buyers
- NDP: A 20-per-cent national foreign buyers’ tax
All three parties are proposing new measures targeting foreign investment in real estate, although the Conservatives said any such policies would not be aimed at corporate foreign investment in purpose-built rental housing.
Investor activity in Canada’s real estate market has drawn much concern, with many worrying it is driving up prices, fuelling speculation, and edging out first-time homebuyers.
Measures to rein in foreign investors make sense, says Laird. The NDP’s proposed 20-per-cent tax on foreign homebuyers, in particular, “would deter a lot of foreign buyers from purchasing real estate in Canada, leaving those units available for Canadians to purchase,” he says.
Moffatt, however, cautioned against “scapegoating non-Canadians.” While there are legitimate concerns around foreign speculation, he says, there is a risk that Canada will end up “discouraging things that (it) would actually like to encourage.”
For example, casting too broad a net could end up making it harder for universities to attract foreign faculty, Moffatt says.
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Addressing money laundering in real estate
Another factor contributing to Canada’s housing crisis is money laundering, some analyses suggest. Here’s what the parties are proposing.
- Liberals: Establishing a beneficial ownership registry, create a Canada Financial Crimes Agency solely devoted to fighting major financial crimes
- Conservatives: Establishing a federal beneficial ownership registry for residential property; reform the Proceeds of Crime (Money Laundering) and Terrorist Financing Act; boost resources for FINTRAC, law enforcement, and prosecutors to identify and prosecute money laundering in real estate; implement recommendations from B.C.’s Cullen Commission at the federal level
- NDP: Establishing a beneficial ownership registry
We will work with the provinces to create a public beneficial ownership registry to increase transparency about who owns properties, and require reporting of suspicious transactions in order to help find and stop money laundering.
Anti-money-laundering advocates have long called on the federal government to work with the provinces and territories to create a national, centralized and publicly available registry that records information on who really owns businesses, houses and other assets in Canada. Such a registry would make it harder for criminals to hide behind shell companies, trust funds and straw men when laundering money, including by purchasing real estate, they argue.
A beneficial ownership registry was already part of the Liberals’ 2019 platform. In its 2021 federal budget, the Liberal government announced $2.1 million to support the creation of a public corporate beneficial ownership registry by 2025.
But even with a centralized, comprehensive beneficial ownership log in place, Canada needs to devote more staff, money and training to detecting, halting and prosecuting money launderers, advocates say.
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