Canada's finance minister described lack of supply as the "central challenge" for the country's housing market
Fresh off the announcement of a deal with the New Democratic Party (NDP) that’s likely to keep it in power until 2025, Canada’s federal Liberal administration unveiled its plans to tackle the country’s housing crisis in the recent budget, revealed on April 07.
Finance Minister Chrystia Freeland’s document contained a raft of policy proposals on housing including the provision of more than $10 billion to expedite the pace of new home construction to around 400,000 units a year.
Freeland left little doubt as to the number-one issue facing the country on the housing front, saying that the housing measures in the budget were a response to the market’s inventory shortages in statements delivered shortly before the full allocation of spending was revealed.
“The central challenge in Canada when it comes to housing is a lack of supply, and this budget is about tackling that head on,” she said in a Budget Day press conference.
That will come as little surprise to anyone involved in the country’s housing or mortgage markets, with January having seen fewer properties listed for sale in Canada than at any point on record, according to the Canadian Real Estate Association (CREA).
Shaun Catchart, CREA’s senior economist, called at the time for an “aggressive national push to build more homes” and said drastic measures were required to ease the market’s lopsided supply-demand situation.
The government believes about 3.5 million new homes are needed within the next 10 years, a target it aims to reach through collaboration with both other areas of government and companies in the private sector.
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The earmarking of new funding aimed at easing the supply crisis is welcome, according to a prominent real estate executive – but he added that question marks continue to linger over how effective the plan will actually be.
“Outside of the money that’s being allocated, I think they really need to find a way to help developers actually build the projects,” Christopher Alexander (pictured top), president of RE/MAX Canada, told Canadian Mortgage Professional.
“In Canada, we had about 19,000 trade workers leave the field in the last two years, and there’s no plan to replace those or recruit them from immigration.”
Speaking with Bloomberg, housing minister Ahmed Hussen, who will be tasked with implementing the government’s proposals, emphasized that the program has already been backed by the Federation of Canadian Municipalities and said that plans were being laid to address labour shortages by investing in skills training.
Still, commentators including CIBC World Markets chief economist Avery Shenfield have expressed scepticism about the government’s ability to deliver on its promise without additional action in other areas.
“Without a targeted immigration plan, or a concerted effort to convince young residents to consider taking up a hammer rather than a laptop, we’re going to continue to struggle to ramp up supply enough to allow more Canadians to own their next castle,” Shenfield argued.
Alexander reiterated that developers needed to be on board with the measures for the government to be able to deliver on its housing strategy over the next decade.
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“It’s great they’re going to have all this money, but there needs to be a plan to speed up development and incentivize developers to build more affordable [units],” he said. “I think that missed the mark, because you can have all the money in the world but if nobody can build, we’re still going to have a housing supply issue.”
Other housing policies in the budget included a proposed tax on homeowners (with some exemptions) who sell their property within a year of purchasing, a measure introduced with the aim of curbing so-called “flipping” in the real estate market.
The government also introduced a proposal to ban foreign non-resident investors from purchasing property in an effort to cool house price growth that has skyrocketed over the past several years.
Alexander said those were “politically-motivated” moves, and that while the foreign buyer ban would likely have little impact on the market, the so-called “flipping” tax could punish those it doesn’t intend to.
“I think the tax on ‘flippers’ is unfair. I think if you’re in the business of flipping, you’re already paying a tremendous amount of tax,” he said. “I keep thinking of the Canadian couple that’s trying to build some wealth: they buy a house, they live in it, fix it up and then sell it. I think that puts them at a big disadvantage.”
