What a Liberal government means for the housing market

That’s it — arguably the hottest Canadian election of our time is over, and we’re awash in a red sea. Except for Thornhill and Markham/Unionville, Oshawa and north Durham, the entire GTA is now held by the Liberal party.

In downtown’s much-anticipated Vaughan vs Chow fight, it was Vaughan by a landslide, with twice as many votes as the NDP’s Chow. The closer you get to the core, the better it went for the NDP, but you have to go all the way to Hamilton to find an orange winner.

As the red tide helped carry him to victory, incumbent Vaughan vowed again to fight jets at Billy Bishop and to re-rail the national childcare program eliminated by the Conservatives nearly a decade ago. In the high-rise canyons he helped create, Vaughan highlighted his party’s 10-year plans for improving transit infrastructure and increasing affordable housing. The latter would see tax incentives for building and renovating rental housing, and financing for new construction.

In a promise to “modernize” the Home Buyer’s Plan, the Liberal Party has said it will change regulations to allow those impacted by “significant life changes” — which could include death of or divorce from a spouse, taking in an elderly relative or a job relocation — to qualify for RRSP withdrawals, instead of just first-time buyers. It’s a smart move, considering that this year, the program was predicted to spin off into more than $2.8 billion in spending and create nearly 20,000 jobs.

“Far too many Canadians are being priced out of home ownership,” says the backgrounder on the Liberal Party’s website. “This places increased pressure on already crowded rental markets, and on crumbling affordable housing units.” The Conservatives were in the process of ending rent-geared-to-income support for social housing when ousted.

The red party vowed to increase the GST rebate on new capital investment in affordable rental housing to 100%, and to direct CMHC and the Canada Infrastructure Bank to “provide financing” to support construction by the private sector, social enterprises, co-ops and not-for-profits of new affordable rental housing. They’ve promised also to inventory all federal lands and buildings that might be repurposed and make some available at low cost in communities where the need for affordable housing is pressing.

In high-priced markets like ours and Vancouver’s, the Liberals say they will review policy tools that could put home ownership within reach for more Canadians by studying whether speculation is driving up housing costs. They also vowed to restore the long-form census, including information on housing. A recent RBC report says that servicing an 80% mortgage on a two-storey house in Toronto gobbles up 67.5% of the average Torontonian’s household income, more than twice the 30% of income mark many financial experts say you should be spending on housing. In Vancouver, it’s more than 90%!

How much change will actually result remains to be seen, with many major changes having already been made. In the last three years alone, Ottawa has changed mortgage insurance rules four times, increasing down payment demands and shortening amortization periods. None of it did a thing to cool prices.

An alternate response few are talking about would be to raise property taxes and cut personal income taxes, effectively taking money from those who own property and giving it to those who don’t, an idea one Sauder School of Business economist called “the most direct and least harmful way” to create some power balance between the have-properties and the have-nots, according to Canadian Business magazine.

Since about two-thirds of adult Canadians are homeowners, such a plan would not be popular with voters (and create a nightmare snafu of red tape between levels of government). There are other measures available, like capping the capital gains tax exemption on primary residences or raising taxes on the most expensive homes in the city as well as property flippers, but it matters little now. The Liberals are in, and they’ll do what they do.

I’m looking forward to seeing if real change is actually on the way!

Feature image credit: 

Justin Trudeau by Steve Russell/Toronto Star via MoneySense.ca

Heritage Lake Estates model by Reid's Heritage Homes