A key issue in the current federal election is helping Canadians purchase or rent a home. Each party has set out an approach for building more homes and making them more affordable. Whether they can make an appreciable difference in a $270 B industry is another matter. Both the Liberals and the Conservatives have set themselves the goal of doubling the rate of home construction to 500,000 homes per year. This would result in 2.2 million homes being built by 2030. The New Democrats have a more aggressive policy of building 3 million homes in that period of time. Meanwhile, the Canadian Housing and Mortgage Corporation estimates that 3.5 million homes will be needed by 2030 to meet the increasing demand.
There are a couple of components to new housing:
- land
- permitting
- materials
- labour and construction techniques
All three parties propose to sell or lease urban lands owned by the federal government for housing. The Liberals and New Democrats propose to target suitable sites within their 740,000 hectares of urban land for affordable housing. The Conservatives would see 111,000 ha (15%) sold to housing developers.
Permitting is the focus for most of the housing policies. Though it feels like the least useful component of the housing development process, it should be pointed out that safe, well-serviced buildings would not be built without permitting. Essentially, each party’s plan involves subsidizing cities and provinces to reduce permitting costs. The Liberal government’s Canadian Housing Accelerator accomplishes this task with a $1 B/year budget. The new agency proposed by the Liberals , Build Canada Homes, would take a more hands on approach to developing new housing across Canada and would invest $25 B in pre-fabricated housing processes as well as $10 B in loans for those building affordable housing. The Conservatives would use funding from the Canadian Housing Accelerator1 and reward municipalities that complete housing at a rate of 15% more units than the year before. The Conservatives see this as streamlining government but the oversight required to keep this process fair and productive will be considerable. The NDP would spend $16 B to speed up housing starts, creating two new agencies – one working directly with municipalities and the other with provinces. This funding would focus on increasing urban density with multi-unit (especially prefabricated unit) buildings and dedicate at least 20% of the housing in each neighbourhood to public or co-operatively funded projects. This latter effort would help produce homes at a variety of price points.
The Goods and Services Tax (GST) in Canada represents a significant add-on to the final price of a home. The Conservatives would waive the GST on all new house purchases under $1.3 M. My calculation23 is that this would cost $8 B in lost revenue and would certainly reduce ongoing mortgage costs for those buying homes under this program. The Liberal proposal is only for first-time buyers of new homes under $1.0 M. First-time buyers tend not to buy new, so I estimate that this would cost $0.3 B in lost revenue. The NDP are targetting utilities for their GST tax cut.
The Conservative party is quick to blame the Liberal government for high rental costs but do not have any specific policies beyond a revitalized home construction sector. The Liberals will re-introduce a successful tax incentive for developers to construct purpose-built rental housing. The NDP would introduce a Renter’s Bill of Rights, which would protect the right of tenant unions to negotiate with landlords and make rental information transparent to fight renovictions.
All parties are taking the housing issue seriously. However, without a steep decline in house prices, there will be little change in affordability. Political parties are loathe to promote a decline in the housing market when so many voters are depending on the value of their home for their future financial security.
- In their costed program, the Conservatives committed to tripling the money spent by the previous government in this area. ↩︎
- Assuming that the average house cost in these programs is $650,000 and that 65% and 50% of the homes are under $1.3M and $1.0 M , respectively. I also assume that 5% of new homes are bought by first-time buyers ↩︎
- The Parliamentary Budget Officer estimated the cost of the Conservative program as being approximately $2 B per year, noting that ” the total number of new units sold was discounted to account for the purchase of condominiums as residential rental properties”. This suggests that income properties will not be elligible for the tax break. ↩︎