What else but bizarre would you call Conservative Leader Stephen Harper’s re-election promise to spend a half-million dollars of taxpayers’ money to collect data on foreign ownership of our real estate market to ensure that the purchase of homes by foreign, non-resident investors doesn’t affect the “availability and affordability of homes for Canadians”?
Harper’s Built His Housing Policy On a Weak Foundation
As if the government couldn’t already obtain such data from the Canada Revenue Agency’s tax records of foreign buyers. Better yet, Mr. Harper’s policy advisers could call major Canadian real estate brokers, such as British Columbia’s Macdonald Realty Ltd. Managers, who would tell him that buyers from mainland China accounted for 70 per cent of their sales of property priced over $3 million.
“It is mainland Chinese buyers who are driving the luxury market. They are dominating. There is an affordability crisis for the [Vancouver] upper middle class, who are no longer able to buy in this market,” Macdonald executive Dan Scarrow told The Vancouver Sun recently.
During a short interview I recently conducted with Macdonald Vice-President of Operations Jonathan Cooper, he confirmed a study his firm conducted in 2014 showing that 33 per cent of its sales went to purchasers from mainland China. (Most of these buyers are becoming landed immigrants, or entering Canada through investor immigration programs.)
The trend of Chinese buying into Canada’s housing market has been on the rise for several years. That demand, plus local investors and speculators trading condos as commodities, are two major reasons for real estate prices getting out of reach for ordinary Canadians.
Our government should follow the examples set by other governments in similar situations, such as Australia and New Zealand. Responsibly, these governments restricted foreigners, and in some cases outright forbade them, from buying into new housing developments. Our next government should do the same as soon as possible in order to dampen demand. If the present situation is left unchecked, middle-class Canadians will be relegated to second-class citizens, financially speaking.
Even more bizarre has been the focus on Canada’s home-ownership rate. Mr. Harper is encouraging Canadians in this over-inflated market to save for a first home. On the campaign trail, a key part of his party’s pitch to younger voters has been increasing the home ownership rate, currently at nearly 70 per cent. This, despite the fact that Canada Mortgage and Housing Corp. recently identified Toronto, Regina and Winnipeg as high-risk markets, a fear echoed by many domestic and foreign economists who have been issuing stern warnings about our overheated market for some time.
Encouraging Canadians to enter into an exceptionally inflated housing market where two houses are being built for every new person added to the working-age population may well lead to catastrophic results once the market goes into correction — as it did in the United States in 2008, when that country’s ownership rate reached 69 per cent.
With household debt reaching historical highs and legions of Canadians spending too much of their income on mortgage payments or rent, this housing policy appears not just bizarre, but poorly conceived. Mr. Harper ought to rethink his housing policy and concentrate on efforts to help millennials, many of whom are finding little choice but to move back to live with their parents.
He can start by providing incentives for developers to build affordable mid-rise rental apartments. This should be at the top of his list. Such apartments can still be built for $150 per square foot and provide the same amenities as newly built condos.
To help such projects get off the ground, he could start promoting a nationwide policy under which federal, provincial and municipal land parcels could be leased out at reasonable rates of up to 99 years to defray the cost of buying land. These new projects would cost less and, therefore, provide less expensive rental choices to Canadians who cannot afford the $2,000 monthly rents common in our major cities. Additionally, those less costly projects could allow newly built apartments to be more spacious, and therefore more conducive to quality living.
Money saved on rent and applied toward the purchase of consumer goods might even help our country out of recession and lower our chronic national deficits.
It seems that Canadians and the news media are preoccupied with other election issues — the Duffy affair, the personalities of Mr. Harper’s opponents — rather than paying attention to what matters the most.
Speaking of those opponents — New Democratic Party Leader Tom Mulcair and Liberal Leader Justin Trudeau — we haven’t heard enough substance from them on affordable housing, either.
Canadians deserve much better. Voters should demand clear answers from their candidates. The cost of shelter should become our main election issue.