Educating Elected Officials about Housing
The Canadian Home Builders’ Association includes 9 Provincial and 56 Municipal Associations across the country who rightfully describe themselves as the voice of the residential construction industry. Once each year, volunteer members from across Canada travel to Ottawa to spend the day meeting with Ministers, Deputy Ministers and MPs.
Given that most of the newly elected MPs know little about the housing industry, a few important facts were used to open the meetings. Many had no idea that residential construction is the largest industry in Canada, employing over 900,000 people earning $51 billion in wages and generating $125 billion in economic activity. And unlike other sectors, residential construction is active in every community large and small everywhere in Canada. Seventy percent of Canadians own a home and 4 out of 5 millennials want to buy a home.
Many MPs know that Canadians are feeling the affordability crunch but they don’t understand how this came about. When they bought their first home it cost them somewhere in the range of 3 times the income of a single wage earner. Today, house prices are 5 to 10 times the income of a two-income family. Over the past decade alone, the average price of a new home has increased by $158,000 while millennial income growth has only averaged $17,000.
Rising property values are good for existing home owners such as MPs but put home ownership out of reach for many. The result? Over 42% of first-time home buyers need help from family members to come up with a down payment. As a result, 1 in 4 seniors are now experiencing some form of financial distress as a result trying to provide financial assistance to their children and/or grandchildren so that they can acquire the down payment for a home.
Ninety-four percent of millennials who are able to afford a down payment cannot acquire the ground oriented single family home they would like and can only purchase a small starter condominium. In fact, over the past 40 years the ratio of single family to multi-family homes has reversed from 70% singles, 30% multi-family to 30% singles and 70% multi-family today. Government policies including intensification have driven land costs so high that single family homes are no longer being built in the numbers needed by today’s families. This is occurring at the same time as we are entering a “baby boomlet” where births are up 20%. Over the next decade there could be a shortfall of 300,000 family oriented homes.
MPs were surprised to learn that taxes on a new home have increased from 3% to 25% today. One of the primary drivers of this increase is development charges, which now total $6 billion nationally and are growing exponentially. These taxes are being unfairly placed onto buyers of new homes rather than shared by the full community that benefits. Taxing only new home buyers has resulted in funding shortfalls for infrastructure that has often delayed development of critical projects. Development and construction regulations and approval process delays resulting from red tape, NIMBY, and slow processes only increase costs.
While low interest rates have allowed many well-qualified Canadians to become homeowners, they have simply masked underlying affordability problems. With rates as low as they can go, the scope of the affordability gap is becoming clearer. While high interest rates might slow price growth, they would also make the affordability gap wider for many Canadians. In markets like Toronto and Vancouver – with strong economies, robust immigration, and growing foreign investment – these affordability problems are magnified even more.
So what could MPs do to help if they were so inclined? An estimated 80,000 Canadian families would have the opportunity to become homeowners by providing 30-year amortization periods for well qualified first-time homebuyers of homes under $500,000 – no cost or additional risk. Remove the “tax on tax” that homebuyers face when GST is applied to municipal taxes on new residential development – a federal cost imposed only on new homebuyers. Provide 50% of funding for municipal infrastructure projects, especially transit, to help relieve the development tax burden levied on buyers of new homes. Fight the underground economy and reduce greenhouse gas emissions with a permanent, refundable home renovation tax credit to be used for energy efficiency improvements by first-time homebuyers.
The foregoing summary of housing issues and solutions was delivered in over 60 meetings with Members of Parliament on Lobby Day. Members were interested and appreciative of the information provided and promised to consider it in future housing related deliberations. Unfortunately, when the budget was released, very little was included to address the housing affordability crisis. Some funds were designated to address symptoms and treat the most extreme cases by providing funding for more subsidized public housing but that was about it.
Everybody gets busy and becomes distracted by other issues and sometimes needs to be reminded of the real priorities. If you share our concerns about how your children or grandchildren are ever going to afford a home or if you are a millennial trying to find scarce funds for a down payment – don’t hesitate to call your MP, MPP and municipal Councillor and remind them of how important home ownership is to you and the future social and financial stability of our country.