How To Make Home Ownership Affordable To All Canadians?

Let’s take a deeper look at the problem. The first factor is population growth: it’s on pause right now, but between July 1 of 2018 and July 1 of 2019, Canada’s population rose by 531,497 people. And they all needed somewhere to live.

Next is demographics: we are an aging population that has gone from young to middle-aged. Middle-aged people tend to be homeowners.

So at this point we have record numbers of first-time homebuyers who are millennials, from their mid-20s up till about 40, coupled with record population growth set to resume from immigration – all vying for a record low number of homes for sale from a large, but currently occupied, housing stock.

Housing’s incredible structural demand is fuelled by historically low interest rates. But what about supply? The root cause of supply shortages is the significant monetary and non-monetary impediments that local and provincial governments have introduced, either to raise money or to satisfy nimbyism. A study by the C.D. Howe institute has detailed these impediments and the significant cost of development charges, land transfer taxes, approval delays and other costs that end up increasing the cost of a home. These costs add up to more than $200,000 per home in supply-restricted cities such as Toronto and Vancouver.

Low interest rates have been somewhat balanced by macroprudential measures that have been introduced over the past decade. These measures include a stress test that ensures individuals looking for an uninsured mortgage are qualified for a mortgage that is the greater of either the contractual mortgage rate plus two percentage points or the five-year benchmark rate published by the Bank of Canada. Currently the latter is close to three percentage points above what well-qualified buyers are actually able to secure from lenders. But these longer-term safeguards are not long-term solutions to the supply issue. If anything, they have probably served to make some builders more cautious.

In other words, more taxation and more regulation are not the solution to this problem. We need to start swinging hammers.

The Canada Mortgage and Housing Corp. has set a goal that by 2030, everyone in Canada will have a home that they can afford and that meets their needs. However, many feel like that goal is getting further out of reach. After all, “everyone in Canada” is a number that gets bigger every year.

Policies that significantly increase the supply of homes available for people to choose from and/or enable people to adapt and improve their current properties are the best way to address this goal. These would help to put the country back to work and help to keep homeownership affordable for the next generation of Canadians.

If you or anyone you know are concerning the purchase or sale of your home, don’t hesitate to contact our team at THE BC HOME HUNTER GROUP with any of your questions or for your free market evaluation, 604-767-6736.