Following the Before the Bell edition on housing in Canada, For Whom the (Door) Bell Tolls,Sixth Estate editors asked panelists to respond to the most voted on unanswered questions from the show. Questions were posed to the Hon. Jean-Yves Duclos MP and minister for families, children and social services, Kevin Lee (KL) chief executive officer, Canadian Home Builders Association, Michael Bourque (MB), president and CEO with the Canadian Real Estate Association, Jeff Morrison (JM), executive director Canadian Housing and Renewal Association and Martin Joyce, partner KPMG Canada. Here are their responses.
Q. What about the fact that there’s very little the federal government can do in a politically realistic manner to materially impact prices for first time buyers?
A. (Minister Duclos) Our government has put measures in place that have helped temper house prices already. For example, with the Department of Finance’s stress test, houses in Canada are now 3.4 per cent cheaper than they would have been without it.
Budget 2019 introduced measures to increase the supply of housing, because it is the most effective way to address affordability in the long run. To help more middle class families, Budget 2019 is offering new targeted support for first-time homebuyers. Among other measures, a program called the First-Time Home Buyer Incentive will be created. For more information, visit: https://www.budget.gc.ca/2019/docs/themes/housing-logement-en.html
Q. Forty percent of Canadians households live with less than $60 thousand per year, none of them will ever be able to buy any house. What about them?
A. (Minister Duclos) Our government believes that all Canadians deserve a safe and affordable place to call home.
Our mandate is to serve Canadians in all parts of Canada, and to support all forms of housing. Our focus with the National Housing Strategy (NHS)<https://www.cmhc-schl.gc.ca/en/nhs> is helping vulnerable Canadians meet their housing needs.
The NHS’ National Housing Co-Investment Fund, for example, will create the next generation of housing, and make communities more accessible and inclusive, while improving life outcomes for low-income and vulnerable people. Tackling housing supply is the strongest antidote to demand pressures that are driving prices higher and preventing Canadians in larger cities from buying or renting affordable housing. In 2018, Canada’s average house price was $277,000
Q. Isn’t the lack of wage growth the real villain in this discussion?
A. (MB) The increase in home prices and household incomes have been largely decoupled over the last 30 years. Home prices have risen considerably as opposed to household incomes.
There are complex economic factors and challenges for the government to consider in order to address this issue.
A. (JM) Certainly the fact that wage growth has not kept up with CPI, and certainly not housing inflation in most markets, is a contributing factor in the overall lack of housing affordability, and has put greater pressure on non profit housing providers. Stagnant wage growth is one of many factors contributing to the demand side of affordable housing.
Minister Duclos referred to the new Canada Housing Benefit that was included in the National Housing Strategy. Once it’s implemented in April 2020, it will provide an average of $250/month to qualifying low income individuals to help offset the cost of housing. Although welcome (and of course, subject to many details that are still unknown), more must be done on poverty alleviation if we want to reduce the demand side of affordable housing.
A. (MJ) It’s a combination of factors of which wages is one input. House prices have increased significantly due to increased demand (newcomers, investors, and booms in certain cities for jobs etc) and supply not keeping pace. Wages affect people’s ability to pay a certain amount for housing, but that doesn’t affect the need for more housing (of all types).
Q. How does the Canadian Home Builders Association see the connection between social/affordable housing and market-rate affordability?
A. (KL) There is a clear connection as all aspects of housing markets are interconnected. A successful housing system has people moving up the housing continuum.
First-time homebuyers moving out of rental have traditionally been the largest source of rental supply. That is why the federal government must adjust the stress test and restore 30-year insured mortgages for these buyers.
Every level of government can do its part by introducing policies that address the full housing continuum, including affordability of homeownership and rental homes. Limiting access to homeownership has negative ripple effects through the rental market, as well as increasing demand for social housing.
Q. A large portion of the Millennial work force does so on a contract basis, further locking them out from mortgage lending. Do our banks need to change?
A. (MB)- Almost one third of Canadians currently engage in some form of freelance, contract, part-time or otherwise precarious work. Non-traditional workers in Canada are facing a harsh reality when it comes to applying for a mortgage. Since they do not have a regular pay check or access to financial statements such as the T4, “gig” workers have found themselves on the wrong side of conventional mortgage lenders. CREA believes that financial institutions and their regulators should adapt to the changing face of today’s work force and ensure lending practices provide more flexibility for non-traditional workers
A. (MJ) This is a larger question here for our societies and whether we need to ensure better security for employment. Unfortunately that might not be possible and lenders (including banks) need to factor in flexibility when assessing a person for a mortgage. Contract work is slowly becoming the new “norm” and if the banks don’t take this into account, other lenders will which might start drawing customers from banks. At that point banks will have to take notice I suspect.
Q. How much are code changes affecting affordability?
A. (KL) With Canada’s housing affordability crisis, policy makers need to consider well all the impacts involved when making changes to the Building Code that increase costs. While current building standards are excellent, there are many ways to continue to improve housing; but this needs to be done through innovation to avoid excessively increasing costs. When you add up all the changes that various groups want that “don’t cost a lot”, it costs a lot!
That is why federal parties need to adopt CHBA’s recommendation to enshrine affordability as a core objective of the National Building Code, to ensure that we are building better, more efficient houses for the same price or less.
You can watch the full edition of Before the Bell on housing here:
Chasing Answers is a new feature from Sixth Estate that allows guests appearing on the show to respond to the top unanswered questions as voted on by the audience.