Posted by Stu Niebergall on 2017-03-11 12:00 AM
Saskatchewan and Canada need strong, competitive cities with housing that the middle class can afford to own. Housing is a recognized cornerstone of the middle class and those aspiring to join it. Housing matters to Canadians. Current homeowners want the equity in their homes to be protected. Millennials and new Canadians want to become homeowners. Those not in a position to own a home, want rental options that are affordable.
We all know it is becoming harder to become a homeowner, but why? The facts are incomes are lagging, especially for millennials, yet housing prices have escalated dramatically. Mortgage rules continue to tighten and tighten, with the latest rounds having the result of locking out many first-time homebuyers out of home ownership.
Historically, residential construction has been the largest industry in Canada, representing more job and economic impact than any other. Today those jobs and the economic benefit they create are at risk. Last year, seven out of 10 provinces had decreases in new housing investment and Saskatchewan was no exception. Not so much because the demand and need it not there, but a higher percentage of individuals and young families who should be at the beginning of entering home ownership are not qualifying for mortgages as prices and mortgage rules exceed their capacity to borrow.
Increasingly, achieving home ownership depends on having parents wealthy enough to help with a down payment. It is estimated that some 44 per cent of homebuyers are receiving financial help from their parents for their purchase and at times to the detriment of the parents own financial retirement needs. For those middle-class children who can get a hand up from the bank of mom and dad, stand to get wealthier, while those without parents wealthy enough to help face growing barriers to home ownership and the financial benefits it provides. The tighter mortgage rules render this disparity even worse. The inability to access home ownership will cause increasing social inequity within our cities.
The Bank of Canada is concerned about the elevated levels of household debt and imbalances in Canada’s housing market. However, slowing residential construction can, in and of itself, have serious impacts on the overall economy. It seems counterintuitive to limit Canadians’ ability to borrow to build a capital asset in home ownership, while other forms of consumer credit continues to grow unfettered.
Family-orientated housing is also under supplied. Canada has a “baby boomlet”, as births are up over 20 per cent in the past decade, at the same time the number of married couples between 25 and 34 is growing. Unfortunately, zoning and regulatory restriction continue to erode the amount of serviced lands available for single detached and low rise attached housing.
Development taxes have risen dramatically over the past decade and in Saskatchewan, more are anticipated. The amount of government imposed costs on a new home are fast approaching 25 per cent in Regina. A larger part of this burden on new home buyers is driven by municipalities seeking to recover too much of the cost of infrastructure from the buyers of new homes, rather than the broader community that benefits. In addition, residential development is one of the most regulated and approval-bound sectors of the economy, which has significant costs. As smart planning calls for intensification, NIMBYism (Not In My Backyard) is becoming a bigger and bigger factor. Infill and intensification development that aligns with the goals of cities is too often delayed or derailed by local resident opposition.
There are simple solutions. Canada needs a comprehensive national housing strategy that addresses the full housing continuum. A strategy that addresses housing affordability challenges in market-rate housing, where 94 per cent of Canadians live, at the same time support those in housing need.
Do no more to mortgage rules to further lock out home buyers. The economic impact is severe.
The provincial and federal governments should be focused on core infrastructure renewal like water, sanitation and transportation to take pressure of municipalities development taxes.
Address the root causes that erode housing affordability and in turn pressure will be alleviated on social housing. More importantly, don’t make society’s need for social housing a burden that buyers of new homes must bear alone. Policies that mandate social or below-market homes be subsidized by market-value homes ultimately increase the price of all homes. The majority of Canadians in need of core housing do not have a “housing problem” but an income problem. They pay too large a share of their income for rent. A portable housing benefit would allow them to afford market-rate rental without tying them to specific units, reducing demand for limited social housing. Implemented wisely, this would avoid upward pressure on market rents too. It would meet the housing needs of many more people for less public dollars.
Building a stronger middle class while addressing those with housing need can only occur when government see housing affordability and home ownership as sound public policy. A strong middle class and the link to housing affordability is an essential part of been competitive in attracting and keeping talent to our city and province.