Not Impressed

In typical fashion, the federal Liberals, thanks to the absence of an overall vision, have tried to put their finger in the housing dike. As in the tale of the Dutch boy, their 'solution' will fail.

Because Mr. Trudeau and company are innately averse to interfering in the marketplace, they are going to make it easier for people to take on more debt while at the same time greatly exacerbating our housing crisis.

First-time buyers across Canada and any purchasers of newly built homes will soon be able to stretch their mortgages out an extra five years, the federal government announced Monday — along with other changes builders hope will spur more home construction, but that observers fear could push prices up. 

The ability to offer 30-year amortizations for insured mortgages was announced by deputy prime minister Chrystia Freeland in Ottawa on Monday, along with a reduction in the down payment required for homes between $1 million and $1.5 million.

“It is going to put the dream of home ownership in reach for more young Canadians,” Freeland said Monday. 

With Monday’s announcement, a first-time buyer of a resale home who takes out an insured mortgage, which happens when a homebuyer provides less than a 20 per cent as a down payment, could also be offered a 30-year loan repayment instead of a 25-year term. The same would apply for any buyer, first time or not, who buys a newly built home.

Except that the dream will quickly transmute into a nightmare, since housing prices will soar beyond their current  record levels.

...the policy changes were also seen by many observers as a spark to demand that could push home prices even higher.

“This is something that’s going to have a direct impact on the buying public as soon as it takes effect,” predicted mortgage broker Mary Sialtsis... 

But any kick to an undersupplied market could come with a cost, she said. “Is that going to end up driving up home prices with multiple offers? Sure, there’s a risk of that, because we’re in a chronic housing shortage in the GTA.”

 David Hulchanski, a housing policy expert with the University of Toronto, sees the goal of increasing housing supply as important. But he, too, has concerns around price inflation if demand is stoked, as well as the impact of allowing people to take on bigger loans. “In Canada, we’re already putting a lot of our financial effort into the housing sector, whereas it could be more productively used elsewhere,” he said. “It’s putting more people in some greater debt.”

This short-term thinking, typical of the increasingly desperate Liberal government, is not the solution for these times. For that, we have to go back a bit in history, when, between 1941 and 1945, government, through a crown corporation called Wartime Housing Limited, built affordable housing you can read about through the above link. 

And this video is instructive:

A direct, interventionist policy that tried to address shortage, the concept of Victory Houses is clearly considered off-limits by today's movers and shakers. They  place all of their faith in marketplace 'solutions', which is why the federal government tosses money at provinces and municipalities to give to private builders in the hope they will come to everyone's rescue.

Newsflash: they will not.