Mortgage Broker

Fall 2019

Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.

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Page 8 of 31

CMB MAGAZINE fall 2019 | 9 editorialsummary WE RECOMMEND: n reinstating 30-year amortizations for insured mortgages to make monthly payments more manageable; n qualifying all borrowers at their contracted amortization period (e.g. 30 years) instead of a 25-year period; n excluding the stress test for low-risk mortgages, including: a. mortgages with terms greater than five years, which do not present borrowers with risks of debt overload due to payment stability and principal reduction over longer terms, and b. mortgage transfers and switches, which better enable borrowers to shop for competitive mortgage terms at renewal time; and n reducing the risk buffer for stress testing to one per cent plus the contract interest rate for all other mortgages. REMOVE GST AS A MAJOR BARRIER TO NEW RENTAL HOUSING Many urban areas throughout the provinces have a shortage of rental housing options. For instance, Metro Vancouver's overall rental vacancy rate has hovered at one per cent or lower for the last five years. CMHC estimates the region has had a net loss of 6,000 purpose- built rental units since 1991, while at the same time Metro Vancouver's population has grown by over one million people and is forecast to grow by an additional million in the next 20 years. is scarcity of rental housing has resulted in increased rental prices and stress for renters. is untenable situation will continue to be a significant challenge unless decisive action is taken. A barrier to addressing the lack of new rental options is the punitive application of the five per cent GST on new purpose-built rental buildings. Under the current GST rules, a rental builder pays GST on the "self-supply" of a purpose-built rental building when construction is completed. is means that while a rental developer intends to keep, manage and operate the new purpose-built rental homes, GST rules require that they pay GST on the market value of the building and property at completion as if they had sold it. is is essentially a sales tax on an artificial transaction that adds millions of dollars to the cost of new rental buildings, even for non-profit home builders. A recent analysis of a 117-unit project in the City of Vancouver showed how removing the GST could reduce monthly rents between 3.04 and 6.06 per cent. Ultimately, this additional tax negatively impacts renters, because rental providers must recoup the costs through increased rents. Removing the GST would make purpose- built rental projects more financially viable and could provide lower rental rates for affordable housing projects. WE RECOMMEND: n Fully rebating or exempting the application of GST on new rental housing. LINK FEDERAL TRANSIT INVESTMENTS WITH FEDERAL HOUSING TARGETS e federal government can encourage effective land use and transportation decisions by linking the need for more housing options with the significant federal transit funding that is planned. Setting new land-use guidelines with housing targets for transit investments would unlock additional home options by supporting the regional and local plans related to transportation. WE RECOMMEND: n leveraging contributions to local rapid transit projects by requiring housing targets; n providing preferred terms/rates to projects within CMHC's Rental Construction Financing initiative that are within a certain distance from a current or planned frequent n topping up federal cost-share ratios for rapid transit projects, currently up to 50 per cent of non-land related capital costs, by a modest percentage for projects that meet or exceed housing targets; and n working with provincial and local governments to explore a transit-oriented affordable housing fund to encourage more purpose-built rental housing with a deeper level of affordability near existing and new transit.

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