Affordability Issues Are a Big Part of the Platforms

Affordability of housing was an important issue in the provincial election and is again in the federal contest. Some of the proposals are useful, some are a waste of taxpayer money, and some do more harm than good.

Oddly enough, the level of government that can most cost-effectively contribute to a solution is municipal.

A variety of ideas from the three competitive parties are in play.

The Liberals have a collection of incentives that could provide up to $30,000 for qualifying first-time homebuyers. Suppose there are ten such families in Anytown looking for a house they can buy for $500,000.

There are four such houses on the market. In the absence of incentives, the four families that are willing to pay the most over $500,000 will get the houses, leaving the other six still looking.

If they are all eligible for $30,000 from the government, the same four families will be the ones willing to pay the most over $530,000. The sellers are delighted by the higher price but the six remaining families are still looking.

The program neither reduces demand nor increases supply. Neither do programs offered by all three parties to make it easier to get a mortgage.

Increasing supply is only useful if it is occupied. Somewhat useful are programs offered by all three parties to penalize speculative buying of units that remain unoccupied, to tax investors flipping units, to discourage foreign non-resident buyers, and to prevent houses from being bought to facilitate money laundering.

This might reduce demand a bit, especially in places like Vancouver, but it will not have a material impact in most markets.

Completely counterproductive is the Liberal proposal to penalize investment housing by Real Estate Investment Trusts, which provide the funding necessary for apartment builders to fund their next project.

The money in the Trusts comes largely from pension funds, endowments, and retail investors. They are especially important for retirees looking for returns better than they can get on savings accounts.

More useful are proposals to convert office buildings to residential purposes, The Conservative offering proposes the conversion of 15% of the 37,000 federally owned buildings.

But none of these efforts to increase supply will succeed if municipalities fail to do their part. In many Canadian cities, there is a severe shortage of land available for development, and strong resistance to the need for greater density in and near downtown cores.

Getting that done requires appropriate zoning and connection to water, sewer, electricity, and other utilities. In addition, there need to be efficient project approval processes.

For example, after years of delays, Halifax has embraced the need for greater density, especially on main corridors on the peninsula. But the amount of land newly available for new development beyond the peninsula is far less than needed to house expected population growth and support homeless people.

The municipality points out that helping homeless people is a provincial responsibility, but as a practical matter it is municipal choices that determine how quickly new housing of all kinds can be built.

Here, the Liberals have a good idea that would have to be done in conjunction with the provinces: fund municipalities to accelerate land availability with flexible funding for capacity (i.e. a surge of planners), land purchases, infrastructure, or to offset policies like inclusionary zoning.

Much more fatuous is their suggestion that government can somehow manage prices or the way people buy homes.

The NDP proposes to create at least 500,000 units of quality, affordable housing in ten years, with half of them completed in the first five years, by partnering with provinces and municipalities. They will waive the federal part of the sales taxes.

No cost estimate is provided. Safe to say that a partnership of three levels of government moving that quickly would eclipse all records.

The Conservatives have measures to encourage private real estate investment and will support transit infrastructure that serves high-density neighbourhoods. They believe that housing for homeless people can play an important role in reducing addictions, and plan to spend $325 million on residences and recovery centres.

Affordability pledges in the platforms go well beyond housing, with predictable differences of method. The Conservatives will facilitate finance technology companies’ ability to compete with big banks and have bigger penalties for price collusion by food retailers.

The NDP will lower phone and internet costs by regulation. It might not work. In 2019, the Liberals promised to reduce cell phone costs by 25% in two years, by regulation. That didn’t happen. The Conservatives will pursue the same goal by increasing competition.

It is good that affordability, particularly of housing, is getting lots of attention. The most useful ideas are the ones that accelerate the pace at which builders can deliver new homes.


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