The new CMHC First-Time Home Buyer Incentive from the Liberals is being criticized. While the incentive is aimed at helping millennials crack the housing market for the first time, critics say it's pretty much useless in already red-hot markets. Mike Le Couteur explains.
Foreigners who already owned homes could keep them, but moving forward, only residents would be allowed to buy. The decision was pitched as a solution to unaffordable housing, a pain many around the world — including hopeful first-time buyers in Toronto and Vancouver — are all too familiar with.
But while banning foreign buyers might be a politically acceptable approach to tackling affordability since they don’t pay taxes or vote, Brian Doucet, a Canada Research Chair in urban change and social inclusion and associate professor at the University of Waterloo’s school of planning, says such a ban in Canada isn’t likely to make buying a home less of a pipe dream for most people.
The affordability problem
What we need to do, he says, is reckon with our understanding of what exactly we think housing is for.
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Right now, the Canadian system prioritizes housing as a source of income over housing as a place to call home, which fuels development based on what will make the most money rather than what is in “the collective interest,” Doucet says. Changing that is key to improving affordability, something that he doesn’t think will happen if the strategy is to ban foreign buyers.
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That idea seems backed up by a housing trends report last month from the Canada Mortgage and Housing Corporation (CMHC). The report zeroed in on non-resident ownership and found that only a small chunk of properties are currently owned by non-residents: 3.7 per cent in B.C., 3.7 per cent of in Nova Scotia and 2.1 per cent in Ontario.
“It’s not that high,” says Aled ab Iorwerth, deputy chief economist with CHMC.
Marc Lee, senior economist with the Canadian Centre for Policy Alternatives (CCPA) in B.C., says imposing a ban would be complicated. The more the CCPA and other researchers have dug into the data, he says, the more they’ve run into “some speed bumps to reducing the amount of foreign investment.”
For one, he says, they’ve had to grapple with “satellite families” — cases where the family lives in B.C. but the main breadwinner is still living and working abroad, not declaring income in Canada. While there’s been some success with the province’s foreign buyers tax, Lee says what’s need is a provincewide conversation about foreign ownership, the extent to which people want to allow it and what changes a ban — however muted — might trigger.
And while a blanket foreign buyers ban might seem like just a policy issue, says Mei Lan Fang, a research associate from Simon Fraser University in Burnaby whose focus includes the Vancouver housing crisis, it’s not.
“In Metro Vancouver, the housing market is quite astronomical, but there’s also a lot of jobs, particularly when it comes to construction and interior design, surrounding all the new condos being built,” she says.
Other ways to make housing more affordable
It’s worth remembering that a lot of foreign buyers don’t actually live in the homes they own, Fang says.
On the moral side, Fang says you would have to consider the history of colonization and lands stolen from Indigenous Peoples whose descendants still live here. From a policy perspective, she says you would have to think about what impact such a ban might have on immigration policies — would they have to be amended? Would we have debates about how long a person would have to live in Canada before being eligible to own?
She used to live in a home in Metro Vancouver where the whole first floor sat empty except for one month a year. That one month of the year, the landlord would stay there. The rest of the house, including where Fang lived, was rented out.
Maybe part of the problem, Fang suggests, is that there just isn’t enough regulation, enough policies that, when enforced, would make sure someone is not buying living space and then leaving it empty 11 months of the year.
Doucet suggests curbing, limiting and disincentivizing people from buying multiple properties that they’re planning to rent out “to accrue more wealth.” Tax their empty homes and tax homes that aren’t people’s primary residences — regardless of whether the owner is domestic or foreign.
He is unequivocal: building more homes isn’t a solution since they’re just going to be bought by people who want to post them to Airbnb to make money. And when it comes to Vancouver, Lee agrees.
“Having the capital to build the housing is not our problem,” he says.
Housing should be local, Lee says, “fundamentally owned by the people who live and work in British Columbia.”
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That could mean a return to some “non-market forms of housing,” Doucet says, beyond the more traditional subsidization of rent. Some options include community land trusts, where an organization rents out homes under certain conditions, or it could mean co-ops. It could also mean putting restrictions on what developers can do with certain parcels of land, he says.
Frankly, Lee says, it’s just important that we’re having the conversation at all.
“It’s important that we don’t assume that the status quo — where there’s large amounts of external capital flowing into the housing market for investment purposes — is the norm,” he says. Do we restrict development? Do we invest in more public housing?