A house is seen for sale on the real estate market in Toronto, April 9, 2009. It will be hard to create a national housing strategy because Canada doesn’t have a national problem. It has a patchwork of often conflicting regional challenges.© Mark Blinch / Reuters
Crafting a national housing strategy is a seductive idea.
We all want a big package that will magically fix everything – from the shortage of homes in remote First Nations communities to runaway prices in Toronto and Vancouver.
Unfortunately, Canada doesn't have a national problem. It has a patchwork of often conflicting regional challenges.
The struggles of people in Attawapiskat, Ont., on the western shore of James Bay, are worlds away from the trials of young Vancouver families trying to outbid wealthy Chinese investors on million-dollar bungalows. And Vancouverites' problems are vastly different from those of laid-off oil-sands workers in Fort McMurray, Alta., worried about defaulting on their homes.
One person's bubble is another person's crater.
So you have to feel for Evan Siddall, president and chief executive of Canada Mortgage and Housing Corp., the federal Crown corporation charged with crafting a national housing strategy. He's barely gotten started and he's already scrambling to lower expectations.
"The scope's ambitious, and expectations are very high, and I must say that's a concern," Mr. Siddall told reporters this week.
"I'm sure if you summed just the budgetary implications of what everybody expects from a national housing strategy, we would have an irresponsible budget request. It's just as simple as that."
And that is one of the downsides of national strategies of all kinds. They make nice political slogans in the drafting stage, but it's a whole lot harder to come up with well-funded and effective policies at the end of the day. Ottawa's climate-change strategy is a classic example of this policy conundrum.
Even the CMHC's role in the housing market is fraught with inherent conflicts. Part of its mandate is to invest in social housing and affordable rental projects. Those efforts increase the housing stock and relieve price pressures facing low-income Canadians.
But CMHC's influence is felt more profoundly in the mortgage market. Before the last recession, the agency worked hard to expand home ownership through its mortgage insurance and mortgage-backed securities business. Mortgage insurance backstops lenders and eases the flow of money into the housing market. The result is that the CMHC now has billions of dollars on the line in the mortgage market – a risk that is ultimately borne by Canadian taxpayers.
More recently, CMHC has been working with the federal government to cool off the hot market it helped create amid worries that too many Canadians binged on debt to buy homes. Ottawa has tightened lending standards by raising mortgage-insurance premiums and minimum down payments on insured mortgages, while halting insurance of mortgages on second homes. But these efforts have been mostly overwhelmed by persistently low borrowing costs.
Mr. Siddall mused recently about making lenders shoulder more of the risk associated with mortgages, possibly by charging a deductible on insurance claims when borrowers default.
Federal Finance Minister Bill Morneau is also warning that more intervention may be coming as he frets about the "highly charged" Vancouver and Toronto housing markets.
"We are going to remain on top of the dynamics in order to consider whether we need to take actions," Mr. Morneau told Bloomberg this week.
It won't be easy. Maintaining financial stability is a delicate balancing act. The last thing Ottawa wants to do is trigger a housing crash, even if doing so would instantly fix the affordability problem.
Monetary policy is also working at cross-purposes. Near record-low interest rates continue to fuel overheated patches of the real-estate market. Sharply higher rates would no doubt slow housing activity, where it's overheated, but also where it's not, which includes vast swaths of the country struggling with a slow growth economy.
On the other hand, cutting rates further could trigger even more risky borrowing, and lead to further overheating.
Mr. Siddall is right to be tempering Canadians' expectations as he consults with housing experts and advocacy groups across Canada.
A national housing strategy is pointless in a country that doesn't have a national housing market.