According to 79 per cent of the 15 economists on Finder’s BoC Interest Rate Forecast panel, the federal government’s housing plan will not do enough to solve Canada’s housing affordability issue, while a quarter (21%) said they were unsure.
As the campaign trail heats up, all parties have been promising new measures to address the barriers preventing millions of Canadians, especially first-time buyers, from finding suitable homes. For its part, the Liberal government has committed to a few key measures if re-elected, including a “tax-free in, tax-free out” first home savings account, which would allow Canadians under 40 to save up to $40,000 towards their first home. Another promise is to double the first-time home buyers tax credit from $5,000 to $10,000 to save on the closing costs.
Commitments to speed up supply include a $4-billion investment in a housing accelerator fund to grow the annual housing supply in the country’s largest cities every year, creating a target of 100,000 new, middle-class homes by 2024-25. The Liberal government also says it will build and repair affordable housing and covert vacant office space into residential units.
Still, Stephen Brown, senior Canada economist at Capital Economics, believes the housing plan is too heavily weighted on the demand-side and could backfire in the long-term: “The focus on demand-side policies should help a small cohort of buyers looking to get into the market soon but, ultimately, will only push up house prices in the long run,” he says.
Moshe Lander, senior lecturer at Concordia University, agrees, stating: “The biggest impediment to affordable housing is on the supply side. As long as municipalities have restrictive zoning laws and continue to block developers from building homes, prices will continue to rise and provide limited options. Subsidies will not reward those that need them as subsidies are a blunt instrument that will benefit those that can already afford a home.”
Brett House, deputy chief economist at Scotiabank, adds: “Policy efforts to stoke demand will only increase prices. All levels of government need to do the hard work together to enable increased supply of appropriate housing with related services in Canada’s major cities.”
Angelo Melino, professor at University of Toronto, goes further to say, “You can’t improve affordability by subsidizing purchasers. This will just raise the price of the existing housing stock. Affordability requires an increase in the stock of low-cost housing.”
The full report, found here, provides further statistics about the housing crisis and other economic issues affecting Canada’s COVID-19 recovery.
