Mortgage Broker

8 | fall 2016 cmba-achc.ca CMB MAGAZINE HOUSING AFFORDABILITY is the number-one issue for every level of politician these days – municipal, provincial and federal. Or so it seems. Escalating house prices over the last year in major urban centres – namely, Vancouver and Toronto – have triggered a groundswell of media reports, expert opinions and political moves, all of them aimed at tackling affordability. Historically, Canada has been considered one of the more affordable countries in which to live. A healthy labour market and low interest rates have contributed to an increase in home ownership over the past few decades. Despite house prices increasing at a faster rate than family incomes, home ownership steadily increased from 62.1 per cent in 1981 to 68.4 per cent in 2006 1 , and it currently sits at 67.8 per cent 2 . By worldwide standards, however, this is appallingly low; in 2014, Canada was ranked only 35 on the list of countries with the highest concentration of home ownership 3 . Of course, we are all acutely aware of the staggering surge in home prices in Vancouver, Toronto and surrounding areas over the last year. In the case of Vancouver, the price of single detached homes rose at an astonishing rate of 25 per cent from the previous year. While Vancouver's market has simmered down almost to a standstill, Toronto's market remains red hot. At this time, owning an average single detached home in Greater Vancouver area costs about 120 per cent of an average family's household income 4 , and it is possible that we will continue to see a downward trend with home-ownership numbers. Various polls report that housing affordability is the number-one concern among voters, and voters believe government should be doing more to make housing more accessible. When he took office last year, Prime Minister Trudeau gave at least two ministers a mandate to tackle the issue. Instructions in his November 2015 mandate letters to the Department of Finance and the Canada Mortgage and Housing Corporation (CMHC), were "to invest in growing our economy, strengthening the middle class and helping those working hard to join it." In addition, and specifically in relation to the CMHC, Trudeau provided a mandate to undertake a review of escalating home prices in high-priced housing markets and to consider all policy tools that could keep home ownership within reach for more Canadians. In September, I attended a speech by the Minister for the CMHC, Jean-Yves Duclos, to find out what he intends to do. He talked about the CMHC's current consultation on housing affordability, stating: "With input from all of you and many others, we will develop a national housing strategy that covers the entire housing continuum, from homelessness, to shelters, to social and affordable housing, to market rental and homeownership. It will address the needs of all Canadians, including those in greatest need." In B.C., with a provincial election looming, Premier Christy Clark is suddenly quite concerned with housing issues, fending off the NDP's jabs about the state of the real estate industry. Fortunately for the Liberals, and thanks to the property transfer tax on the sizzling real estate market, the government now has close to a couple of billion dollars to throw at housing initiatives. e paradox behind government initiatives to make housing more affordable is that government interference in the housing market only makes housing more expensive, to the point that it's completely out of reach for some buyers, such as millennials and first-time buyers. Take, for example, Premier Clark's 15 per cent foreign buyers tax: Some argue it will only add to the cost of housing, as vendors will seek to recover tax costs on the back end when they sell. ere is no shortage of well-deserved criticism over the new series of mortgage rules announced in October by Finance Minister Morneau. e prevailing consensus is that the new rules will have a profound impact on reducing competition in the mortgage market and raising mortgage costs for borrowers. Requiring that all insured homebuyers qualify for mortgage insurance at the Bank of Canada's conventional five-year fixed posted rate has been estimated by the mortgage industry to reduce the purchasing power of buyers by as much as 20 per cent 5 . is change will impact hardest upon the millennial generation wanting to leave the rental pool, magnifying affordability challenges for this segment of the population multifold. Rental vacancy rates are at a historic low, which means this segment may either find themselves homeless or living in their parents' house for years to come. All levels of government have now put screws into the backs of homebuyers, and it is time for them to make good on their promises of easing the pressure. In keeping with the additional mandates of the Department of Finance and the CMHC to strengthen the middle class and to ensure housing affordability, the CMBA has proposed the following modifications to the new mortgage rules: Recommendation 1: Exempt all insured mortgages with terms greater than seven years from the requirement to qualify borrowers at the Bank of Canada's conventional five-year fixed Various polls report that housing affordability is the number-one concern among voters, and voters believe government should be doing more to make housing more accessible. When he took office last year, Prime Minister Trudeau gave at least two ministers a mandate to tackle the issue Effective solutions to Canada's housing affordability crisis seem no closer than before. What should be done? BY SAMANTHA GALE, CMBA EXECUTIVE DIRECTOR Taking the Long Way Home

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