10/14/2021
Sharing this interesting read.
Trudeauâs Plan For Housing
Justin Trudeau's Plans for Housing
Now that the dust has settled and the Liberal government is back at the helm, you may be wondering what to expect and whether anything will change. Time will only tell, but as housing prices continue to rise and supply dips to an all-time low, itâs important to understand what promises the Liberals made during their campaign and how we can best prepare for some of these changes that could roll out shortly.
$4B Housing Accelerator Fund
With the housing supply shortage set as a top priority, the Liberal government has pledged to invest $4 billion in a Housing Accelerator Fund to build 100,000 new homes by 2025. The goal is to incentivize municipalities to build faster than their current housing targets by offering a cash âbonusâ. They also vow to work directly with communities to identify vacant and underused properties that can be converted into housing.
Will It Work?
The fund could be a major driver of increasing supply and fixing surging price gains. However, this will depend on whether the right resources are employed to support and regulate municipalities and drive growth in the right direction with affordable and sustainable housing solutions.
Anti-Flipping Tax
The Liberals have also promised to curb rising prices and speculation by establishing an anti-flipping tax on residential properties. What does this mean for buyers? Any property that is sold within the first 12 months of purchase would be subject to the tax. However, the liberals have stressed that any transactions as a result of death, pregnancy, divorce, employment, or disability, would be exempt.
Will It Work?
As good as it sounds, itâs unlikely that the anti-flipping tax will have any real impact on the housing crisis here in Canada. Aside from being difficult to regulate, it could also create a ripple effect in the market. Many property flippers are investors who improve undervalued properties in poor conditions and then put them back on the market. Adding a tax like this would remove any benefit of doing so, in turn dissuading investors and developers from renovating and improving housing stock for the middle class. Experts argue that the best way to deal with speculation is to increase supply and put restrictions on short-term rentals and âghost homesâ.
New Foreign Ownership Ban
During this election, the âhot topicâ was the newly proposed foreign ownership ban designed to regulate foreign buyers in the market. By incorporating a two-year ban on ânewâ foreign ownership of non-recreational and residential property, the Liberals hope to prevent wealthy overseas investors from sitting on empty and underused properties so that more homes will be available for Canadians.
Will It Work?
A policy such as this must be done strategically in order to work. Otherwise, it could send the wrong message and deter foreign investment, which could impact our entire economy. Recent data also shows that foreign homeownership is not as high as most people think â it sits at approximately 3-5%. And since foreign buyers can already purchase property under numbered companies and through family members who reside in Canada, the only way to effectively address the issue is to create and prioritize the beneficial homeowner registry first.
Anti-Money Laundering Initiatives
Itâs no secret that money laundering here in Canada is a serious problem. In 2018 alone, nearly $5 billion of dirty money was found to be laundered in BCâs housing market raising prices by at least 5%. To curb such activities from pushing prices even further, the Liberals have pledged to create a national publicly accessible beneficial ownership registry, as well as a Canadian Financial Crimes Agency.
Will It Work?
Putting in measures to reduce money laundering will benefit all Canadians, but time is of the essence. British Columbia already implemented its own Land Owner Transparency Act on November 30, 2020, yet no significant changes have been seen. With data just starting to come in, it could easily take another year or two until we find out if the Act has done anything at all to help. In theory, itâs a great plan, but if we are relying on anti-money laundering initiatives to make a big impact soon, weâre likely to see the housing crisis only get worse.
First Time Homebuyer Incentives
A new tax-free First Home Savings Account and a program to inject $1 million in loans and grants into rent-to-own projects are aimed at helping renters build up a down payment and enter the market faster.
Will It Work?
Rent-to-own programs have existed for decades and have had little success. Since the program requires landlords to offer a rate thatâs below market, it may be hard to attract the support it truly needs to get the program off the ground. And while tax incentives are always welcome, some may argue that these types of programs do little to tackle the real problem, which is a lack of supply and rising prices.
Homebuyers Bill of Rights
In an attempt to create a fair, open, and more transparent market, the Liberal party is also planning to enact a Homebuyers Bill of Rights. Under this bill, theyâve flirted with the idea of banning blind bidding entirely and ensuring banks and lenders offer 6-month mortgage deferrals to homeowners.
Will It Work?
The Homebuyers Bill of Rights wonât fix the housing crisis but it does have the potential to add much-needed protections for buyers and sellers. Real estate experts agree the current system could use some tweaking, but they donât believe auctions are the best solution for this. Auctions typically pit homeowners against buyers and remove the freedom of choice for sellers. There are other ways to increase protections without changing the entire system. Deferrals, on the other hand, would ensure that homeowners are protected if interest rates quickly rise or another crisis occurs in the future. Any policy that ensures the stability and integrity of our housing market is a step in the right direction.
Nik Thakkar
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