With the federal election less than two weeks away now, housing affordability has become one of the key issues during the campaign.
The Canadian Real Estate Association says homeownership can seem like an impossible dream for many Canadians these days and realtors across the country witness first-hand the anxiety Canadians feel as they look to enter the housing market and the challenges they face when it comes to buying a home.
Early in the election campaign, CREA launched its Election 2019 Resource Hub for REALTORS® called REALideas to share policy proposals to help Canadians achieve their homeownership aspirations.
“Housing affordability is top of mind to Canadians who have been shut out of housing markets across the country. Realtors know that all real estate is local, and during this campaign we want to have a conversation about how politicians can help Canadians who face obstacles to homeownership in different parts of the country,” says Jason Stephen, president of CREA.
“Mainly what we’re looking to do is to advocate for current homeowners, potential homeowners, and people who want to be homeowners, to provide an environment that is fair for all.”
CREA’s proposals include encouraging the construction of new housing supply as well as regionally sensitive adjustments to lending rules and mortgage regulations which will help to improve housing affordability right across the country.
Michael Bourque, CREA’s CEO, says the association wanted to ensure all political parties keep in mind that no two housing markets are the same, and regional and local factors matter when you implement policy.
CREA has listed the following as key issues for the election campaign:
- Housing Supply. Use federal infrastructure investment to encourage construction of new housing. “As municipalities request funding to complete critical infrastructure projects, CREA asks all political parties to commit to place conditions on federal infrastructure investments to encourage the construction of new housing. This will help address the current supply challenge. We also ask for a commitment from all federal parties to work more closely with provincial and municipal governments and, where needed, develop new solutions to regional housing challenges,” says the association;
- Mortgage stress test. CREA says many aspiring homeowners have been sidelined by the government’s B-20 regulations (the “stress test”) that came into effect in January 2018. Canadians in some markets are now forced to save more, over a longer time period, for a down payment or buy a less expensive home. “One of the unintended consequences of the stress test has seen borrowers move away from the regulated market to less-regulated options. This generates a greater potential for borrowers to pay higher rates of interest,” says CREA, which is calling for the stress test to be adjusted for regional considerations. It is also asking that existing mortgage holders be exempted from the stress test at the time of renewal;
- Modernize mortgage lending practices. Each year, thousands of Canadians enter the ranks of the gig economy—a labour market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs, says CREA. It recommends federally-regulated lenders be encouraged to accommodate the growing number of Canadian gig workers seeking to enter the housing market. Rules governing income verification and reasonability of income must continue to adapt to changing trends of employment;
- Increase the First-Time Home Buyers’ Tax Credit. CREA recommends the $750 non-refundable tax credit be replaced with a $2,500 non-refundable tax credit per qualifying home for first-time home buyers to better align with current closing costs; and
- Re-introduce the 30-year amortization. “CREA believes the government should reintroduce the 30-year amortization for insured mortgages to assist these young first-time home buyers. Extending the length of a mortgage improves affordability by reducing the size of monthly payments. For example, a $472,000 home with a 10 per cent down payment and a 5-year fixed rate mortgage at 3.74 per cent would have monthly payments of $2,242 on a 25-year amortization. The same mortgage with a 30-year amortization would have monthly payments of $2,019 – a difference of $223.”
“Although we’ve suggested many things on the demand side, we also have to look at creative ways to increase supply because if all you do is create more homebuyers then it creates this feeding frenzy for people who want to enter into the market. We have to start the debate of increasing more supply and allowing for the opportunity to fill the need in some markets,” says Stephen.
“Housing affordability is a big thing on certainly the Millennial cohort. What we know about Millennials is they want the aspiration to own a house. They want the opportunity . . . Housing affordability has been a big issue in this campaign . . . We’re just trying to take the side of the consumer and provide an opportunity where it’s a fair and balanced playing field and that there isn’t one market in the whole country.”