The federal Liberals capped off a run of prebudget housing announcements with new pledges on Friday, including plans to crack down on mortgage and real estate fraud, to restrict the purchase of single-family homes by large, corporate investors and to provide low-interest loans of up to $40,000 for secondary suites.
The government says its strategy envisions 3.87 million new homes built in Canada by 2031. That will be a challenge, given that the Canada Mortgage and Housing Corporation said just last week that housing starts are expected to decline this year before recovering in 2025 and 2026, reflecting the lagged effect of higher interest rates on new construction.
“Canadians need homes they can afford. This is one of the most urgent issues people are facing,” Prime Minister Justin Trudeau said, speaking at a news conference in Vaughan, Ont. “Younger generations are worried that they won’t have a life that looks like how they grew up – like their parents and grandparents had. That’s not fair.”
Unveiling an overarching housing plan – which contains budget promises old and new – the Liberals also laid out a few more details about their recent push to look at building more housing on federally owned lands. Housing Minister Sean Fraser said the plan to mostly lease instead of selling off public lands stands in contrast to Conservative Leader Pierre Poilievre’s strategy.
“It’s fundamentally a different approach. Mr. Poilievre’s plan would simply sell off thousands of parcels of potentially high-value public lands to developers, without the federal government receiving an appropriate value,” Mr. Fraser told The Globe and Mail in an interview.
He said that where possible, public lands should remain public lands, with Ottawa entering into long-term leases over the life cycle of the buildings that will be constructed.
The new measures are meant to ease both housing stress for millions of Canadians and the current political pain of the governing party. Mr. Trudeau’s Liberals are trailing the Conservatives in the polls and would likely lose an election if one were held today. Housing is a key issue: Canadians across the country are struggling with higher rents and soaring mortgage costs while demand and home prices remain strong. Mr. Poilievre has captured the despondent mood of many younger voters when it comes to their prospects of owning a home.
The government is also hoping to spur the building of rental stock with a temporary accelerated capital cost allowance tax measure, increasing the rate to 10 per cent from 4 per cent. The move is meant to incentivize builders by increasing their after-tax return on investment.
On the related issue of encampments and homelessness, the government is proposing to invest $250-million while pushing for cost matching from provinces and territories, for a total of $500-million.
Ahead of Tuesday’s budget, Ottawa has announced a spate of housing policy proposals, including a $1.5-billion fund to acquire rental units and ensure they remain affordable, a push to construct more factory-built homes and an additional $400-million for its $4-billion Housing Accelerator Fund.
Last September, the federal government removed the GST from new rental construction. On Friday, the government said it will expand this measure to student residences built by public universities, public colleges and public school authorities. This change will apply to student residences with a construction start date on or after Sept. 14, 2023 and before 2031, so long as work is completed before 2036.
On Thursday, the government made announcements specifically aimed at new homebuyers, with a plan to allow 30-year amortizations – up from 25 years – for insured mortgages on newly built homes. Ottawa said extending the amortization limit for insured mortgages – those made with a down payment less than 20 per cent of the property’s purchase price – in these circumstances will enable more young Canadians to afford a monthly mortgage payment and will encourage new supply.
The government also said Thursday, without providing much in the way of details, that it will allow some existing borrowers to permanently extend their amortization period so that they can reduce their monthly mortgage payment to a level they can afford.
However, the CMHC and others have warned that longer amortizations could stoke housing demand and spur higher prices. Ottawa has already taken a number of steps to keep mortgage defaults at bay, such as pushing lenders to lower distressed borrowers’ payments with amortization extensions. This pushes default risk into the future.
Deliverability will be a key question for many of these announcements. The April 16 budget is expected to lay out the bare bones of these policies, including what the government calls “confronting the financialization of housing” to restrict the purchase and acquisition of existing single-family homes by “very large, corporate investors,” and the Secondary Suite Loan Program. But details will only be rolled out in the months ahead.
Mr. Fraser said the secondary suites policy, which helps homeowners add a rental unit to their property, is key. “To empower Canadians to take part in the solution, through low-cost loans to build additional homes on property they own already, is an important piece of this.”
To combat mortgage fraud – which Ottawa said is artificially inflating demand and can increase home prices – the government intends to consult with the mortgage industry to create a Canada Revenue Agency tool to verify borrower income. Similarly, the budget will propose CRA funding to further crack down on tax non-compliance in real estate transactions, which the government says will protect first-time homebuyers from artificial market distortions.
“This is a comprehensive suite of reforms that we believe will put Canada in a position to solve the national housing crisis,” Mr. Fraser said of combining the government’s list of housing announcements into one “holistic” book ahead of Tuesday’s budget.
With a report from The Canadian Press
Kelly Cryderman