Housing affordability has been at the forefront of Canadian’s minds for the last eighteen months and it’s even more important now during this federal election. But what exactly does affordability mean in the context of housing, mortgages as well as what has gone into changing affordability? A basic definition of housing affordability is the cost of housing, whether renting or owning, relative to the household or family’s income. So, in Canada, affordability has decreased due to the increase in rents or home prices while incomes have not adjusted accordingly.
You may be asking, “Then what’s caused home prices to increase so drastically?” There are four areas to look at when it comes to housing affordability: supply, demand, capital gains and activity.
Supply: There’s a massive housing shortage in Canada (more than any G7 nation per capita). With a limited supply of goods, prices increase.
Demand: With interest rates at all-time lows coupled with speculative buying, homebuyers don’t want to miss out on the possible gains from entering the market, driving more people into homeownership.
Capital Gains: Middle-class Canadians have enjoyed an unprecedented increase in the value of their home in recent decades and have little interest in seeing that growth plateau or even decline
Activity: The mortgage and housing industry requires a healthy and stable market to ensure continued progressive growth ahead.
Every Canadian has different housing needs and wants. That’s why it’s imperative to understand how each housing platform will affect you and your family. Below we have highlighted each Party’s housing platform to help you become a better-informed voter.
The Liberal Platform
“The dream of having your own place should be in reach.”
The Liberals hope to deliver on their promise of increased transparency and protections for homebuyers. They also plan on adding millions of housing units over the next four years through a number of diverse strategies including a two-year ban on foreign buying, as well as a new Home Buyer’s Bill of Rights.
Foreign-Home Buyer Freeze
The platform stresses that “homes should be lived in”, promising a two-year ban on foreign home buying, as well as a new tax targeting vacant or underused housing. Their goal is to free up properties, adding more supply and alleviating price pressure.
More Affordable Housing Construction
The Liberal Party has also pledged to build 1.4 million homes over four years and will push major cities to start building more middle-class homes and affordable housing.
If the Liberals are re-elected, you can expect a new tax-sheltered account for down payment savings of up to $40,000 for those under 40 years of age, and the First Time Homebuyers’ Tax Credit to be doubled to $10,000. They will also implement a temporary ban on flipping homes and blind bidding while providing homebuyers with additional rights in the new Home Buyer’s Bill of Rights. This includes mandatory inspection periods, transparency in bidding, and access to comparable sales data.
The Liberals will ensure that mortgage lenders act in the client’s best interest and that they are fully informed of all the lender options available, as well as the programs in place to assist with buying a home. Additionally, under the new bill, banks and lenders will offer mortgage deferrals up to 6 months if a major life event occurs.
The Conservative Platform
“We need to build enough housing, not just to keep up with but to get ahead of population growth.”
The Conservatives have promised to address the housing supply “crisis” by focusing on rapidly building housing to keep up with the population growth, and by freeing up vacant properties to help meet the increasing demand.
Two-Year Trial Foreign Buyer Ban
With a strong focus on increasing supply, the Conservatives are proposing a two-year trial ban on foreign buyers of residential properties who do not live in Canada to help free up more homes for purchase.
Rapid Home Construction
They also pledge to build 1 million homes over the next three years and plan to convert up to 15% of vacant government real estate into new housing, hoping it will ease pressure on housing prices. The platform features new tax breaks to build additional rental housing too.
Addressing Long-term Housing Needs
The Conservative party aims to improve the future of buyers and homeowners by expanding public transit and increasing housing density near transit routes to better connect people who are moving further out for affordability. They will also implement a new Indigenous Housing Strategy coined “By Indigenous, For Indigenous” to support the community’s housing and future needs.
Mortgage Qualification Easing
O’Toole’s platform plans to tweak the mortgage stress test to better assist all Canadians, most importantly, self-employed and “gig” workers who already struggle to qualify. They vow to increase the limit on mortgage insurance, with the hope of assisting buyers to qualify more easily. Longer, seven-to-ten-year mortgage options are also on the table.
The NDP Platform
“Making sure everyone can afford a place to call home.”
The NDP party’s goal is to help hard-working Canadians buy a home they can afford by addressing big investment, money laundering, and adding both affordable housing and rental property stock.
20% Foreign Homebuyers’ Tax
The NDP is taking a different route on foreign ownership. They pledge to introduce a 20% foreign homebuyers’ tax on the sale of homes to individuals who are not permanent residents or citizens. They also promise to target money laundering and organized crime found within the Canadian housing market with the hopes of releasing much-needed housing stock back to the market.
Affordable Housing boom
For the NDP, it’s not just about boosting supply. They pledge to build 500,000 affordable homes over 10 years with half being completed in the first five. They will further increase the capacity of co-ops, social and non-profit housing through the creation of Fast Start Funds to help communities get the assistance they require to get projects in motion.
The NDP is also focused on helping renters who are facing surging prices and evictions with a pledge to provide $5,000 a year towards assisting families with their rent payments. To encourage builders to increase affordable rental property stock, they will waive the federal portion of the GST/HST construction cost on new rental units.
30-Year Insured Mortgages
To help make affording mortgage payments easier, their platform plans to reintroduce 30-year CMHC insured mortgages on entry-level homes. This will make the monthly payments smaller, freeing up more funds for families.
The Green Party Platform
“An ambitious, practical roadmap to building livable and affordable communities where everyone has a great place to live.”
The Green Party’s goal is to build more livable, affordable communities for all Canadians by increasing social-housing construction, lifting planning rules, and adding stronger rent controls.
To Be Continued
The Green Party has yet to release their election platform, but they have proposed stronger regulations on foreign investment in Canadian real estate. They have recently advocated for a federal vacancy tax that would apply to foreign ownership and corporate entities with empty units.
If you have any questions, please contact your Pineapple mortgage specialist.