Many hard-working Canadians who aren't living beyond their means wonder why their mortgage is eating up so much of their paycheck. Experts say that's partly because there aren't enough apartments.
Well, one of the ways our leaders want to solve this problem is with Build Canada Homes (BCH) – a new government agency that gives us a new acronym but does little to change our housing bill.
Lately I keep coming back to the same questions on this topic – questions worth asking the people spending your tax dollars:
- Considering there are 17.4 million homes in Canada, does it really take a whole new bureaucracy with $11.6 billion in new cash spending to build just 26,000 (0.15 percent) more? The Canada Mortgage and Housing Corporation (CMHC) says: “We provide housing programs to increase housing supply, preserve inventory and contribute to affordable housing.” For years, untold billions have been spent on CMHC affordable housing programs, research, and policymaking. Our existing housing agency should be equipped with experts. Why can't they figure out how to encourage more development without creating an entirely new housing authority?
- Will Build Canada Homes tip the scales? The 26,000 new units projected by the non-partisan Parliamentary Budget Officer (PBO) represent just 3.7 percent of the PBO's estimated housing gap of 690,000 units in 2035. Yet the Housing Ministry told me that BCH will “drastically expand affordable housing.” I think we have a different definition of dramatic.
- Why do we have to spend a fortune to turn on the supply tap when you can just turn on the demand tap? One option is to slow the flow of new arrivals to Canada, which eases the pressure by keeping more homes on the market. That is the most effective card the government can play, and that is exactly what it has done. What it needs to do now is adjust population flows in real time to address regional labor and housing shortages. With all real-time data available, there is no excuse for setting targets for the entire immigrant population, category and distribution only once a year.
- Isn’t the affordability problem already improving – without the need for more bureaucracy? By some measures, mortgage affordability is now 24 percent better than the extremes of 2022, thanks to lower house prices, falling mortgage rates and rising incomes. Sometimes the market works on its own.
- Should we instead focus more on rental construction and mortgage accessibility? If you want to temporarily dampen homebuyer demand while giving renters more options, then:
(A) provide more government support for rental construction (exactly what CMHC has done with its successful, low-risk multi-unit mortgage insurance program), and
(B) Mortgages a little harder to get if they are not tied to new construction (the exact opposite of what the government did with flat 30 year repayments for first time buyers). Sure, this attitude won't make me Man of the Year in mortgage industry circles, but economics is economics. Supply and demand drivers are not that difficult to figure out.
Now I've seen all the government's justifications for reinventing the housing policy wheel with BCH. It wants to build directly “at scale,” using modern off-site construction and developing public land, yada, yada. Frankly, I see no reason why CMHC – with a few tweaks – couldn't do the same thing at similar costs and results.
Government agencies need to be run like a business, not like tax-funded charities with big checkbooks and few questions. If bureaucrats are paid to meet key supply creation performance indicators and they aren't, fire them – like any company would.
So if you're struggling and struggling to make mortgage or rent payments, don't count on BCH to step in and improve your life until 2030. For one, “we can expect construction-ready projects to materialize within 10 to 16 months at the earliest, assuming policy is implemented quickly and the market adapts,” says Zach Pendley, real estate analyst at EY Canada. Construction then takes many quarters or years.
Second, BCH primarily targets “low- and middle-income households.” Granted, a minority of the 26,000 homes will be direct-build units at market rents, but that does little to help middle-class earners above the estimated median after-tax family income of $76,000 in 2025 (which barely gets by in this over-taxed, wallet-straining country). They must fend for themselves while Big Brother redistributes their hard-earned tax dollars to build beautiful new homes for others.
How about we do things that actually equitably help reduce housing costs, like:
- Manage immigration flows in real time on demand
- Continue to push rental construction forward
- Find new ways to incentivize (force) communities to reduce bureaucracy and development costs
- Build high-speed rail to take commuters to lower-cost regions in minutes
- recognize that higher interest rates are already helping to reduce housing costs
- Stimulate income to improve affordability, and
- Promote development using CMHC's existing infrastructure?
The PBO estimates we only need an additional 65,000 homes per year “to close the housing gap”. If the government's current housing experts can't do this at the taxpayer's expense, how can a new set of bureaucrats do better than the seven measures mentioned above?
In many ways, Prime Minister Carney – who has a sharper business sense than his predecessor – can hardly be blamed for wanting to try something different. The old policies didn't work and the only thing they reliably produced were excuses.
And hey, if you're a fiscal hawk, there's some good news: Total federal housing spending is expected to shrink by 56 percent by 2028-29, according to the PBO.
Regardless, to this writer BCH just seems like CMHC with a new logo. Taxpayers and young homebuyers would be better off if more energy were directed toward effective reforms—measures that result in six-figure housing starts instead of five-figure ones.
Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
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