Federal budget misses the mark on housing, says SFU finance professor

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The federal government’s $10 billion injection aimed at reducing the price of a home in BC and across Canada has missed the mark, says a Simon Fraser University finance professor.

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“The only long-term way to build more housing, to improve affordability, is to make it easier to build,” said Andrey Pavlov. “There is certainly enough people interested in building housing right now. The bottleneck is not money for housing, it’s waiting for city approval and inspection, and a confusing provincial building code.”

On Thursday, federal Finance Minister Chrystia Freeland announced a budget that included a $4 billion Housing Accelerator Fund, managed by the Canada Mortgage Housing Corp., aimed at building 100,000 units of housing over the next five years.

Freeland also set aside $1.5 billion over two years to create 6,000 new affordable units — with at least 25 per cent of those directed toward women-focused housing projects — and $150 million over five years toward changing building codes to focus on low-carbon construction projects .

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Housing prices in BC have increased by 50 per cent over the last two years in parts of the province, driven by record low interest rates, high levels of immigration and relatively low levels of construction.

It’s the third element, however, that the government should focus on, Pavlov said, and it needs to happen at a municipal and provincial level at the direction of the federal government. Pavlov said delays in permitting and onerous building code requirements were tying up condo and market rental developments across Metro Vancouver.

“What we need is to make it easier to build,” he said. “Approval requirements need to be focused on two things. The look and outside dimensions of the property, and the health and safety of the building. Projects need to be reviewed much faster and built much faster.

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“Historically housing has been a very attractive investment not just in BC but around the world. It’s buying an asset that hopefully will appreciate over time that you also live in it. It’s worthwhile to make affordable housing but the only way to get there is to build more. Like a lot more.”

Paul Kershaw, director of UBC’s School of Population and Public Health, said the $10 billion proposed for housing was a small amount given $85 billion had been set aside for retirement income security. He said the budget “fails to recognize our country’s addiction to high and rising home values” as a root cause of the affordability crisis.

“The wealth many homeowners gain from skyrocketing prices is the unspoken flip-side of unaffordability,” Kershaw said.

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The federal government also plans to ban non-Canadians from buying residential properties in Canada for two years. Refugees, international students on the path to permanent residence, as well as individuals with work permits, would be exempt. The government said it would continue to oversee what impacts foreign money is having on housing costs across the country and is prepared to strengthen the ban if needed.

By 2023, the federal government has also promised a tax-free First Home Savings Account that would give first-time homebuyers a way to save up to $40,000 toward a home. It works like an RRSP where the contributions are a tax deduction, however when you withdraw the funds you don’t pay tax on them.

The government thinks the plan will cost $725 million over five years in forgone taxes.

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Aside from these measures, the first-time homebuyers’ credit will double to $10,000 and, starting May 7, the government will charge GST on people who buy properties and put them back on the market within 12 months.

The government is also creating a Home Buyers Bill of Rights ensuring the legal right to a home inspection and ending blind bidding.

In a statement, Real Estate Board of Greater Vancouver chairman Daniel John said the group wanted the government to be cautious with policy measures that inserted the government into the sale of private property.

“That kind of intervention should be done seldomly, carefully and with the rights of all parties in mind,” John said.

— With files from The Financial Post

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