Construction cranes and buildings being constructed in downtown Toronto on Jan. 25.Fred Lum/the Globe and Mail
The Liberal government is under pressure to address soaring home prices and Canada’s affordable-housing problem in Thursday’s budget. Two years into the pandemic, the typical national home price is 52 per cent more expensive and the shortage of rentals have spread to smaller cities. Victoria, Halifax, Gatineau and Peterborough, Ont., are dealing with historically low vacancy rates of around 1 per cent.
With the NDP agreeing to support the Liberals until 2025, here is a look at some housing policies that could be introduced this week. Both parties agree they want to build more housing and provide more funding to help low-income renters. They have also both accused institutional investors of driving up housing costs.
Housing Accelerator Fund
One of the Liberal campaign promises last year was to establish a $4-billion fund to encourage construction of 100,000 new homes in the largest Canadian cities by 2025. The plan was to reward municipalities with funding if they increased densification or added more housing units per square kilometre, streamlined the construction approval process, developed housing around public transportation, and dealt with resident opposition to new housing in their neighbourhoods. It is not clear whether the fund would be used for affordable social housing, regular market housing or both.
“Reducing the approvals timeline would certainly help developers get product to market faster and more affordably,” said Heather Tremain, chief executive officer with Options For Homes, a non-profit developer that provides shared-equity mortgages for low-income earners so they can buy a home.
Kevin Lee, CEO of the Canadian Home Builders’ Association, a lobby group for home builders, said the fund could be used as a real incentive to cities that are able to increase their housing starts.
Investor ownership of housing
The Liberals and NDP have said they want to tackle “financialization of housing” by the end of 2023. They have not defined financialization, but have both said big investors of real estate are driving up housing costs. They have not explained what kind of investor would be covered by any new rule.
The Liberals have singled out real estate investment trusts, or REITs, as ripe for tax reform. REITs are exempt from paying tax on their net income as long as they distribute it to their unitholders. However other institutional investors that invest heavily in real estate, like the Canadian pension funds and private equity firms, are also exempt from paying tax on net income.
John Lorito, partner with Stikeman Elliott who has worked with REITs for decades, said any move to tax REITs like corporations would be “significant.”
Minto Apartment REIT, which develops and manages apartment buildings, agreed. “The impact on our business and Canada’s supply of affordable housing would be negative,” said CEO Michael Waters.
The Liberals have drawn a clear line between institutional investors and what they call mom-and-pop real estate investors, or those who invest for themselves and not on behalf of a group of investors. Ahmed Hussen, the Minister of Housing and Diversity and Inclusion, has previously said his government does not want to “negatively affect” small landlords “because they are actually providing a rental service to a lot of people.”
Homebuyers bill of rights
The Liberals have proposed to improve transparency in the homebuying process, including requiring sellers to tell buyers the amount of competing offers on properties. Currently, most bids on homes are “blind,” meaning buyers are unaware what others are offering to pay.
Realtors would be required to disclose if they are representing both buyer and seller in a deal. Such double-representation situations are seen as potential sources of conflicts of interest.
Renters
After the first year of the pandemic’s housing boom, the Liberals boosted funding for the government’s $72-billion National Housing Strategy to help house Canadians. That plan was introduced in 2017 and is expected to be implemented over 10 years. It includes a program to help first-time homebuyers with down payments and multiple initiatives to help build, repair and refurbish affordable rental units.
Garima Talwar Kapoor, policy and research director at anti-poverty foundation Maytree, said there are tens of thousands of people that are on wait-lists for affordable social housing. She said she would like to see the funding increased significantly. “We need to address their acute housing needs directly,” she said.
The Liberals and NDP have publicly said they will extend plans to rapidly build housing for vulnerable people as well as impose stricter affordable housing qualifications to one of the federal construction loan programs.
Foreign real estate investors
The Liberals and NDP have separately targeted foreign real estate purchases, even though domestic buyers and investors – not foreign buyers – are thought to be behind the pandemic’s real estate frenzy. The Liberals have proposed a temporary ban on foreign purchases and the NDP has pushed for a tax for non-resident purchases.
During the previous real estate boom in 2016 and 2017 in Toronto and Vancouver, foreign buyers were partly blamed for driving up prices. Since then, Ontario and B.C. have imposed foreign buyer taxes. As well, in 2019, the federal Liberals proposed to add a 1-per-cent tax on vacant homes owned by foreigners, but that is not yet law.
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