Nine months out from the next federal election, the Liberal government says it’s trying figure out how to make home-buying more affordable for millenials.
In a pre-budget public event in Aurora, Ont., on Tuesday, Finance Minister Bill Morneau was asked if the federal government had any plans to help first-time home buyers enter an increasingly ruthless housing market.
Rising interest rates and mortgage costs, coupled with stricter mortgage qualification rules have locked out many wannabe first-time home buyers from the market.
Morneau said that, since taking office in 2015, the Liberal government has focussed on three major issues: the country’s lack of housing, rising real estate prices, and making home-buying affordable for millenials.
But on the point of millenials, have they?
In 2015, the Liberals promised to improve the Home Buyers’ Plan, which allows first-time buyers to borrow $25,000 (tax-free) from their RRSP to put toward buying a home. The money has to be paid back within 15 years.
Then, in 2017, the party introduced a 10-year $40-billion national housing strategy that was supposed to provide more social housing and affordable rental units — not exactly a millennial-specific problem — but the government said it would help make homes more affordable in places like Vancouver because it would give young Canadians more affordable rental options.
In today’s hot real estate market, especially in places like Toronto and Vancouver, first-time home buyers are up against a lot: the mortgage stress test, rising interest rates (which makes borrowing more expensive), and high home prices.
The stress test was introduced on Jan. 1, 2018, in an attempt to cool the market, but it’s wound up hurting first-time home buyers in the process.
Building industry leaders have said it’s time to reduce or repeal the test (referred to in legislation as “B-20”) in order to keep the market balanced.
“We’re going to continue to lobby for a pullback now on B-20,” Brad Carr, chief executive officer of Mattamy Homes Canada, told Bloomberg last November. “That had a very targeted outcome. It’s been achieved so it’s kind of overkill now.”
The stress test can also be seen as a blanket approach to a localized problem, since high housing costs are largely relegated to certain parts of Ontario and B.C. Some analysts have said the test is causing borrowers to approach private lenders that don’t have to comply with federally regulated mortgage rules, which is difficult for analysts to monitor.
As we enter election year, all of Canada’s major political parties are posturing around the topic of affordable housing.
Conservative MP Karen Vecchio said in a statement on Tuesday that the Liberals' carbon tax has made housing less affordable.
“Justin Trudeau’s policies are making life more expensive for Canadians, pushing their dream of owning a home further and further away,” Vecchio said.
A day earlier, NDP Leader Jagmeet Singh said that over the next decade, he would help build 500,000 new affordable housing units across the country, and recommended putting a stop to applying GST to the cost of building new affordable units. He wants to offer a subsidy to renters who spend more than 30% of their incomes on housing, and double the tax credit first-time home buyers get, from $750 to $1,500.