Condos and apartment buildings are seen in downtown Vancouver, on Feb. 2, 2017.DARRYL DYCK/The Canadian Press
Evan Siddall, head of Canada Mortgage and Housing Corp., has long been outspoken about what he calls “the glorification of home ownership” and the “overpromotion” of buying property.
It is no surprise Mr. Siddall does not have many fans in the real estate business, which sees him as working against its interests, those of Canadian home owners and first-time buyers.
A central worry of Mr. Siddall’s has been the risk of high prices for younger people hoping to get a foothold in the inflated markets of Toronto and Vancouver. He fears tiny down payments of 5 per cent could leave buyers exposed to market fluctuations and the broader problems that could cause.
Last year, he argued in favour of the mortgage stress test, which since 2017 has made for stricter buying rules. That stoked the ire of industry.
In recent months, after the pandemic hit, CMHC forecast price declines, but the market is so far unstoppable. Prices have climbed to a new record, up 3.5 per cent since March. In July, CMHC tightened its underwriting standards and, in a subsequent debate this month, Royal LePage president Phil Soper called Mr. Siddall’s arguments “bizarre.”
Mr. Siddall keeps on. This week, he warned of high mortgage deferral rates and the danger they pose to the housing market and Canada’s economy.
While it is unusual for a Crown corporation boss to be so publicly opinionated – perhaps he is emboldened by the fact his term is up Dec. 31 – Mr. Siddall’s key message is valid. Canada’s housing market, especially in Toronto and Vancouver, is without doubt stretched.
Is it a dangerous bubble? That’s difficult to know with any certainty. What is certain is that record low interest rates, a medicine that eases the pain of a pandemic recession, comes with side effects. Low interest rates in theory make mortgages more affordable – but when low interest rates underpin high prices and spur them even higher, as they have in recent years and again this year, that’s the opposite of affordability.
So when Mr. Siddall sees what he believes is an overpromotion of home-buying by the real estate industry during a recession, it’s not unreasonable for him to sound an alarm of caution.
CMHC, created in 1946, has multiple missions. It sells mortgage-loan insurance required for buyers that have a down payment of less than 20 per cent. CMHC has private-sector competitors for this product.
CMHC, however, has other important roles. It steers Ottawa’s national housing strategy and helps get much-needed rental housing built. It works on housing for Indigenous communities, and helps immigrants find places to live. The core of its mandate is affordable housing – not home ownership.
Mr. Siddall and his self-confidence come from years in investment banking, similar to former Bank of Canada governor Mark Carney. Mr. Siddall in fact worked as a special adviser to Mr. Carney in the early 2010s, when Mr. Carney was bank governor. Mr. Siddall then took the reins at CMHC.
Beyond current risks, Mr. Siddall sees a fundamental problem: a shortage of housing in key economic cities such as Vancouver and Toronto. He favours building density “on a grand scale” – the big priority being rental housing. This view is not wild-eyed. This page has made the case repeatedly.
Early this year, The Economist published a series headlined, “Home ownership is the West’s biggest economic-policy mistake.”
After the Second World War, governments heavily promoted home ownership. These days, younger people are priced out because of, as The Economist says and we have argued, “a lack of building.” Such restrictions are a market inefficiency – and “deeply unfair.” The Economist did not mince words. This housing market, with its high prices and lack of opportunity, is a “rotten edifice.”
Some people may not like Mr. Siddall’s message or his tone, but it is important to listen.
These are not normal times, and housing problems are worsening. Research suggests that if housing was more affordable in New York, San Francisco and San Jose, the U.S. economy would jump significantly.
The same could be said for Toronto and Vancouver. These cities are the engine of Canada’s present and future. If people can’t afford to live there, it is all of Canada’s loss.
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