Conservative Leader Pierre Poilievre speaks at a press conference in Ottawa on Oct. 28.PATRICK DOYLE/The Canadian Press
Jonah Prousky is a management consultant and freelance writer who focuses on business, technology and society.
Federal Conservative Party Leader Pierre Poilievre is obsessed with the phrase “common sense.” It’s become a crutch for him to lean on during public appearances – a way to sell his plan for the country, on every file, in just two words. And it seems to resonate with voters, given the Conservative Party’s lead in the polls.
But not every issue, especially complex ones such as housing affordability, can be solved through the kind of “common-sense” simplification, bureaucracy slashing and tax cuts that translate into quippy slogans such as “axe the tax” and “spike the hike.”
Mr. Poilievre announced on Monday that the Conservatives plan to cut the sales tax on new homes sold for $1-million or less if they form government after the next election. The announcement builds on an earlier promise he made to remove the 5-per-cent goods and services tax (GST) on new rental construction offering prices below market value.
Mr. Poilievre plans to offset these forgone tax revenues by cutting two Liberal housing programs: the Housing Accelerator Fund and the Housing Infrastructure Fund. These funds account for more than $10-billion in government money aimed at increasing home building through local government support and improving the infrastructure, such as sewers, that undergird housing starts.
The “common-sense” rationale behind Mr. Poilievre’s plan is that working with municipalities to build homes and infrastructure is slow and, of course, requires a degree of government oversight or bureaucracy. The effects of tax cuts, on the other hand, are felt immediately, hence their possible appeal with voters.
Housing affordability, however, is not an issue that Canada is going to solve quickly. Canada Mortgage and Housing Corp. estimated in 2022 and 2023 that to restore affordability the country needs to build 3.5 million more homes than current projections by 2030. That goal is out of reach even if we double our rate of production. Hence, it could take a decade or more, if we’re lucky, to solve this problem.
And if there’s one thing housing policy analysts agree on, it’s that there’s no single fix for the housing crisis. It requires investment in infrastructure, which Mr. Poilievre’s plan appears to axe without replacement. It also requires zoning-bylaw reform, tax reform, streamlined permitting processes, incentives for builders and housing assistance programs.
So when Mr. Poilievre says the new policy will lead to “less money for big banks and greedy governments” and “more money for you and your family,” Canadians should be skeptical. They should be asking for proof.
Yet, when it comes to the economics of the plan, Mr. Poilievre equivocates. When asked whether builders would pass off savings from tax credits to buyers, he said, “businesses will pass on those savings because if they don’t, then buyers will buy from someone else. That’s what competition means.”
Like all of Mr. Poilievre’s “common-sense” slogans, there is a kernel of wisdom here. Builders may need to pass on tax savings to homebuyers to keep prices competitive. Then again, they might just increase their dividends or repurchase stock. The actual “pass-through rate,” or the amount of savings that will reach individuals, will depend on the market. But in general, firms and individuals usually share the benefits of tax deductions. For that reason, tax credits for builders may not be the most efficient way to throw money at housing affordability.
The same is probably true of Mr. Poilievre’s idea to cut the GST for homebuyers. On a $600,000 home, for example, a buyer would save $30,000. But if they’re putting 20 per cent down on a 25-year mortgage, as most Canadians do, that tax saving would only amount to $6,000 upfront. That’s all well and good, but it’s not the kind of windfall that makes home ownership more accessible to most Canadians.
Additionally, tax credits don’t just affect first-time homebuyers. While tax cuts might lead non-profits such as Habitat for Humanity to build more affordable homes, they also encourage investors to gobble up real estate.
About 15 per cent of houses in British Columbia and Ontario are owned by investors. And there’s an alarming trend of larger institutional investors buying up single-family homes in Canada and the United States. For these buyers, for whom a property is not a home but an income-generating asset, a 5-per-cent tax discount will be very enticing.
So when it comes to addressing the housing crisis, Canadians need complex, and not so-called “common-sense,” thinking from their elected leaders.