Budget Blog: Housing

Author: Nick J. Kyte

Tuesday April 16th, 2024

It’s clear the focus of the 2024 Federal Budget coming today is going to be on housing.

In the last two weeks, the federal government has announced a collection of initiatives aimed at increasing housing supply and overall affordability. From loans and red tape cuts, their new plans have a lot to say about housing. I wanted to break down what’s come out so far, and what I’m keeping my eye on today for the federal budget. A lot of it was targeted to renters, but current and prospective homeowners shouldn’t feel left out! Remember that more rental supply and protection means prospective buyers will have fewer dissatisfied renters to compete with.

First of all, there is a difference between affordable housing and housing affordability. Affordable housing is geared towards folks and families who wouldn’t otherwise be able to afford it, and it's generally rent-geared-to-income. Housing affordability or accessibility is what really impacts us all. It's how much of your income you are spending on your mortgage, or rent, how long it takes to build a home, how much land is available, and the hoops you (or your builder) have to jump through to get you across the threshold. And the accessibility of housing in Canada has gotten out of hand.

More Homes:

The first thing that caught my eye was the pre-budget announcement stating plans to build 3.87 MILLION new homes by 2031. This is very much needed in Canada. We've not kept supply up in terms of our needs as a population and with rising immigration. Most people know that when there is limited supply and high demand, the prices go up. But what about when supply is drastically out of touch with pent up demand, and that demand is only going up? I certainly want my daughter to have all the opportunities I had and more.

Leveraging Rental Payments for Good Credit:

I really believe this is a win-win for everyone. It would also place more emphasis on being a good tenant and would entice more investors to bring more available units to the marketplace. The biggest impact of this is on individuals, because it would help would-be former renters qualify for a mortgage and get it with better rates.

Thirty-year Mortgages?!

A relatively overlooked piece of these announcements is extending mortgage amortizations to 30 years for first-time homebuyers purchasing newly built homes. I think this is a great idea - it's very common outside of North America, and if someone had asked me, I would’ve said it should be extended and offered for resale properties as well. This gives the buyer a bit more purchasing power to get the right property for their needs.

Public Land Leases:

My Nonno always said: “buy land Nicky, it’s the only thing they’re not making more of,” and he was right, but what I didn’t get at the time was how much land the government owns and what they do with it. I don’t think they consulted him, but it seems like the government took his advice anyway and with this they are shifting away from the highest bidder buys the lot approach to instead lease the land out, especially for building more affordable homes.

Back to the Future:

Speed and efficiency are essential for building more housing. Anything that can be done to shorten build time and streamline the process with the municipalities would lessen the burden on builders and developers. One thing that was done well before the Second World War was solid “missing middle” housing (townhomes, duplexes, fourplexes, and low-rise buildings - really anything between a single-family detached home and a highrise condo). The federal government announced a pre-approved catalogue of home plans to ramp up supply faster, especially to fill that “missing middle”.

I’ve heard some concerns that influxing the market with this much supply would negatively impact sellers’ prices. It's a reasonable conclusion, but it doesn’t account for how out-of-pace supply has been kept. I don’t think there’s cause for concern here; better prices means more participation and more competition, which generally make for a better time for sellers and buyers alike.

A word of caution to my higher-budget clients…The money for this budget has to come from somewhere and the government has already promised they “will not increase taxes to the middle class.” There is no commitment or specifics yet on any increases, but I would bet my (tax) money that higher value property taxes, large corporations and high net-worth individuals should keep an eye on announcements on that front.

Between posting new listings and meetings today, I’ll be keeping a close watch on the 2024 Federal Budget as it rolls out, and I’ll have more to share on what this means for buyers and sellers in Ottawa later this week.