How easy should it be to buy a house? It’s a question federal party leaders are asking themselves right now as they revise housing platforms to lure voters towards casting a vote in their favour. Conservative Leader Andrew Scheer, for example, recently promised to loosen the mortgage stress test and lengthen mortgage amortizations from 25 to 30 years which would result in lower monthly payments for buyers.
For some young voters, that fact alone is enough to sway a person from Liberal to Conservative. Krystle Williams-Bhagwandat just purchased a new home in Whitby and participates in an online forum with buyers who purchased units in the same. She couldn’t help but notice the excitement generated by Scheer’s announcement, telling the Toronto Star: “Everyone’s really happy about that. I think they’re all trying to vote Conservative now because of that.”
It’s a policy meant to compete with the Liberals’ First Time Home Buyer Incentive. But Toronto broker John Pasalis says these political promises won’t lower housing costs. “Getting rid of the stress test in Toronto and Vancouver would be popular with voters but the reality is it is just pushing up house prices. It’s a positive policy that fuels more demand and it’s already a very tight market,” he told the Star.
“I think it was (CMHC CEO) Evan Siddall who said — and he’s right — everyone is so focused on the stress test but they’re not realizing that one way of keeping homes affordable is not seeing prices go up 7 per cent a year. Prices have been relatively stable in part because of the stress test. Any lift you get from the 30-year amortization goes out the window after a year if prices go up 7, 8, 9 per cent,” Pasalis said.
He stressed that when it comes to tackling the rising inflation of housing prices, the rental market can’t be overlooked. “They should have more policies that are a little bit more equitable for renters on top of building a new supply of affordable rentals,” Pasalis said.
David Macdonald, senior economist with the Canadian Centre for Policy Alternatives, an Ottawa think tank, agreed that politicians too often made the mistake of addressing solely homebuyers – and not those in the rental market. “We could make 35-year or 40-year amortizations and those would be plenty popular. It’s just not a great idea,” he said.
“We’ve got ourselves into a pickle in the housing market and there isn’t a simple solution to reducing housing prices. What will likely be the solution is, hopefully, government policy keeps housing prices more or less in check and that continues for a decade or two and inflation slowly eats away at their relative price. Then people can afford to buy them or certainly young people can afford to buy them,” he said.
Macdonald noted that homeowners today were carrying significantly more debt than new home buyers in 1999, for example.
He said the Liberals’ National Housing Strategy was on the right track because it promised to add 15,000 affordable units each year for the next decade.
“(That) is actually pretty good compared to the last 25 years but it’s below the number of units we were building in the 1970s and 1980s where we were building 20,000 new affordable units a year,” he said.
“The Greens are targeting 25,000 units a year that would get us at least where we were in the 1980s and the NPD is targeting 50,000 new units a year. That would be a fairly dramatic increase even compared to where we were in the 1980s and is likely more on par with what we’re going to need going forward,” Macdonald said.
The NDP is proposing the biggest number of affordable units — 500,000 in 10 years, with half built in the first five years. The party will also provide rent supplements up to $5,000 per year for as many as 500,000 families.
Voters will have plenty of time to weigh their options before October 11.