Front Burner - Where the major parties stand on housing affordability

Episode Date: August 27, 2021

Housing affordability is shaping up to be a top issue for voters in the upcoming federal election. What are parties promising to do about it? And will it actually work? We ask senior director at the Smart Prosperity Institute Mike Moffatt.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. If you work hard, if you save, your dream of having your own place should be in reach. But for too many people, it just isn't. And that's not right.

This is, of course, Liberal leader Justin Trudeau in Hamilton, Ontario this week, speaking to how so many people are being shut out of the housing market right now because of rising costs. The anger around the issue is palpable this election, so much so that when Trudeau speaks to it, it speaks back. At the same time, we'll crack down on the predatory speculators that stack the deck against you. You got six years to do something, buddy.

So no more blind bidding. You had six years to do something. You didn't do anything. No more foreign wealth being parked in homes. Trudeau isn't the only leader addressing unrest over housing. The Conservatives and the NDP have also announced their housing platforms, where they're actually calling housing affordability a crisis.

It's time to face the facts. We have a housing crisis in Canada. And the reality is, over the past six years, things have just gotten so much worse. People cannot find a home that's in their budget. The average price of a home in Canada hit an all-time high in March at over $700,000. And since the pandemic, what used to be a problem in big cities is now a problem everywhere. I'm Jamie Poisson, and today on FrontBurner, Mike Moffitt will walk us through the housing platforms for all three major parties.

He's a senior director at the Smart Prosperity Institute, and he advises politicians on policies just like this. And we'll ask him whether any of the parties' plans will actually help housing become more affordable. Hi, Mike. Thank you so much for being here to take part in the great Canadian pastime, I guess, of talking about house prices. Well, thank you for having me. So looking at the housing market right now, in a few words, and I know you're a little bit older than me, you have children who are a little bit older, you were able to get into the housing market and buy a house a while ago. But how would you feel right now if you were hoping to buy your first home for your young family? I think we just couldn't do it. Now, I'm lucky I'm on the sort of tail end of Gen X. We bought our first home in 2004 when we were in our late 20s. It was a purchase price of

$168,000. Interest rates were a little bit higher back then, about 5% instead of about the 2% to 3% now. But we could at least afford to make a down payment. And now if I look at that house, you know, very similar houses in London, Ontario, where this house was, they go for about $700,000. And even with the lower mortgage rates, the monthly payments are about double. Wow. So obviously, obviously, we've got a problem. We've talked about this a lot on this show. And we can talk about how effective these plans might be in a minute. But for now, if you could just give me the pitch. So what policies are on the table that are supposed to help me afford a home right now?

that are supposed to help me afford a home right now? So things that either allow you to pay the rent or save up for a down payment. So the new Democrats are talking about rent relief during the COVID pandemic. So if you're having trouble paying the rent, this will help you out. They're talking about extending the length of mortgages to 30 years.

So if you're paying off your mortgage longer, your payments are a little bit lower, which can help. They're talking about doubling the first time homebuyers tax credit, which is something to help people buying their first home be able to make that down payments. We want to tackle this housing crisis in a serious way, and we want to build more affordable homes. We want to build half a million new homes that are within people's budgets within the next 10 years. We believe that there is a real choice in this election. You can choose Justin Trudeau,

who's allowed the housing crisis to get worse, who's protected rich investors over you and your families, or you can choose New Democrats, who are going to fight for you, who are going to tackle this housing crisis and put you and your families first. you can choose New Democrats who are going to fight for you, who are going to tackle this housing crisis and put you and your families first. That first time homebuyers credit is both the New Democrats and the Liberals.

Oh, okay, okay. Liberals are talking about a $1 billion project to help scale up what's called kind of rent-to-own projects. The idea is being like, if you're renting a property, helping you go on and purchase that. They're talking about a first home savings account. So it's basically a tax-free savings account like the TFSA, which would help people save up for their first home and reducing insurance charged on mortgages. Again, all trying to put more dollars in people's pockets so they can win some of these bidding wars.

We'll help you buy your first home sooner. We'll get you to a down payment faster with a plan worth tens of thousands of dollars when you buy your first home and the launch of a new rent-to-own program. And what are the conservatives saying around this idea of making it easier for people to be able to buy a home? Yeah, and the conservatives are, again, focusing somewhat like the liberals on issues of mortgage insurance and actually somewhat like the NDP

on the rules around a mortgage. So they're talking about changes to the mortgage stress test, making it easier for people to pass the stress test. So they're talking about changes to the mortgage stress test, making it easier for people to pass the stress test. So changes to eligibility and insurance, creating new markets for seven and 10 year mortgages. So that's the focus of the Tories.

It's all sort of, not so much giving people money, but if you change the rules, you're going to allow people to place larger down payments. Our plan will provide more Canadians with a path to home ownership by making it easier for more families to get a mortgage. To do so, we will develop a new market in 7- to 10-year mortgage terms

to provide stability both for first-time homebuyers and lenders. And we'll make improvements to the mortgage stress test and mortgage insurance rules to help Canadians afford homes. Right. Essentially giving them more like purchasing power, right? That's the, is that the term that economists like you use? Purchasing power. Absolutely. So because a lot of the restrictions are sort of regulatory. We sort of prevent people from placing large bids because we don't want them getting into financial trouble. They're talking about, OK, well, let's tweak those a little bit.

You know, maybe they're a little too strict. If we loosen those, that would allow people to place larger bids. OK, OK. And again, I want to come back to this, particularly what you think this is going to do to prices. But there's another kind of policy, the kind that actually makes more homes. And so are the parties also promising to increase supply here? They are, and they're doing it in very different ways. So the idea of increasing supply is if you've got three bidders for every home, well, one of the ways you can fix that is just having more homes for people to go in. So the NDP are talking about

building a half a million affordable housing units over the next 10 years. They're talking about tweaking some of the rules to make affordable housing less expensive to build, changes to GST and that kind of thing. But they're really almost exclusively focused on the affordable housing side. We also want to build more affordable homes. Our plan is to build half a million new homes that are within people's budget so people can actually afford to take those next steps in their family, to grow their family or to continue their careers and not have to worry about leaving their friends and family behind. Whereas both the liberals and conservatives also have affordable housing promises that are a little, they're less aggressive. But what they are promising is to build or allow more market rate housing to get built. So the sort of standard,

you know, everything from single family homes to condos to you name it. The conservatives are talking about changing the rules that when they give cities transit funding, that those cities better make sure that there's enough medium and high density housing along those subways and LRT routes so people can afford to live near transit stations. It's time to focus on transit-oriented development, ensuring that we build homes and increase density near transit. The Liberals are doing something rather novel. They put together this $4 billion housing accelerator fund. And the idea behind

that is they're going to help municipalities modernize their planning and zoning systems and the software around that to basically get approvals sped up and get some zoning changes. Normally, the federal government can't do a whole lot when it comes to municipal rules. So what the Liberals are basically saying is, well, we by ourselves can't change municipal rules, but we can put together a pot of cash to help municipalities change those rules.

We're putting forward an extremely ambitious plan that is going to continue to get people not just into homes, but help them buy those homes. And that is something that is a choice that Canadians get to make. Now let's talk about what you think about all of these proposals, and let's go back to the purchasing power. So I have to say I was a little confused when I saw these platforms. Housing prices are too high, but some of the policies that you mentioned in that first batch are focused on empowering buyers to be able to put down higher bids. So how exactly would this make a house cheaper for somebody? Yeah. And in fact, it does exactly the opposite. And, you know, this is across the board.

Every party is advocating these types of policies. And they have in the past, go to 2019 election, 2015 election. But what they essentially do is if you've got three bidders for every house and we've seen stories in the media where, you know, sometimes it's 50, 60, 70 bidders for a single house. You know, you might change who wins that. Right. You might change which of the three bidders wins those house, but it doesn't change the math that two of those other bidders are going to walk away empty-handed. And now again, you've also created the conditions that however much that winning bid would have been, it is now higher because you allow all of these bidders to place higher bids.

So I understand the politics of it. I understand that people might hear this and go, okay, well, that sounds like it'd be good for me. I'll vote for your party. But I think this is going to throw fuel on an already raging fire. You know, I would imagine the second batch, it's intuitive to think that it would maybe throw some water on that fire, right? Like if you introduce more housing into the system, then all of these bidders would have more places to go. Maybe they wouldn't need to have these crazy bidding wars. But I guess my question for that is, what's the likelihood that the parties can actually build houses as fast as they're saying here?

Yeah, and that's the ultimate challenge with all of this. So the affordability policies are easy to implement, but not particularly effective. The supply policies are effective, but not particularly easy to implement. So when you look at the NDP proposal around building affordable housing, which will certainly help, but a lot of the issues we have around affordable housing is that a lot of affordable housing money is already going unspent. Again, because there's a lot of rules and regulations about building these kinds of properties. So it's, it's great to see, you know,

we need more affordable housing in Canada. So the NDP are absolutely right there. It's just a, I think the question there is, okay, can, can you actually take that money and get shovels in the ground? So I, that's, that's an open question. And that applies equally to the liberals and conservative promises on affordable housing. I think on the market right side, the conservatives and liberals will be able to get a bit more done. On the conservative one, you could certainly put conditions on transit funding. That is something absolutely the federal government can do. Municipalities are going to be cash strapped

over the next few years as we recover from COVID and taxes on real estate go down from, you know, decline in brick and mortar retail, decline in commercial properties because of work from home. Our cities are going to be cash strapped and they're probably going to be willing to take this extra cash with strings attached. The liberal one, I would say, is potentially really transformative, but it's also the biggest question mark because we've never done anything like this in Canada. This housing accelerator fund is particularly novel, This housing accelerator fund is particularly novel, but like any novel policy, we don't know how well it's going to work. I love the idea and theory. I think of all the sort of policies that have been proposed. It's the one from any party that could make the most difference.

But time would have to tell how well this thing could work. A simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people and I have some startling numbers to share with you. I've talked to millions of people, and I have some startling numbers to share with you.

Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo. 50%. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Cops. You know, even if, let's say, any other of these policies work and they are able to really build more, do you think that that will make a big difference, though, in house prices? One reason I ask is because big immigration numbers are coming into this country in the next several years. Would that actually put the kind of downward pressure on house prices that we need now? Yeah. And my concern is it's not enough. I think it's a good

start. You're right. I think we shouldn't underestimate the challenges ahead of us that we have a growing population, particularly in our biggest cities. And not only do we do we have higher levels of immigration, higher immigration targets, but we're also seeing over the last few years, a big boom in international students. And we're not getting a lot built for them. And I think that's one thing missing from all the platforms. Because right now, what's happening is there's not enough student housing. So students are often renting homes. And this is causing investors and speculators to buy out family housing and then rent it back to students, which is which is both hurting the rental market, but also hurting the homeownership market.

So I would have loved to see the parties address the shortages in student housing that we're having across the country. 17-year-old Dylan Bentley is among hundreds of incoming students at the University of Victoria scrambling to find a place to live. Just the whole situation is kind of kind of sucks, you know, like I got to figure out how to find a place off campus and everyone's trying to find those same places. Just this week. But I would say that, you know, I am sort of pleasantly surprised that in 2019, most of the policy prescriptions were all around these sort of affordability ideas, which clearly I think we all know what I think about those. Yes, I don't think the parties are

doing enough, but they're doing more than they were in 2019. And I think that's a good thing. And as critical as I can be about them, I don't think we should lose sight of that. They're moving in the right direction. And I feel like they're finally understanding the magnitude of the problem, even if they haven't made it all the way there yet. If I could push back on that a little bit, I think some people might feel that these governments also oversaw this stratospheric rise in housing and did nothing. And that it's kind of over for a lot of people now. And I wonder what you might say to that. People who feel like it's gotten so out of control that now there will be two classes of people in this country, people who can afford homes, who have parents who have homes and can pass down that generational wealth,

afford homes, who have parents who have homes and can pass down that generational wealth and people who do not. Yeah. And I am incredibly worried about that, that we're developing basically a two class society where you have one class who can afford to buy a home or even, you know, afford to rent a nice place because they have parental help and another class who, you know, don't have that parental help and are never going to be able to break into the housing market the way that I did back in 2004. So I'm very concerned about that. And I wouldn't blame any voter if they were sort of cranky right now at the situation and saying like, look, this has gotten out of hand. You know, we do have sort of a classic Canadian problem here of overlapping jurisdictions where, you know, some of the policies are federal, some of the policies that we need are provincial,

most of them are municipal. So it's also hard to know exactly who to blame for this, which also causes politicians to be able to sort of point fingers. And I actually think that that is part of the cause of this housing crisis in the first place, is that every government assumed it was some other level of government's responsibility. So nobody did enough. And we are here, unfortunately, today having to live with this. Now, this is and has been a longstanding priority of this caucus of mayors. And it is now more than ever on the minds of Canadians with what's happening in the housing market. We need the federal program that was put in the National Housing Strategy

is working well. We just need the money out of the door faster. And that's why I'm here in Ottawa is to talk to the housing minister, I think, right after this interview. Oh, really? Yeah. And I have throughout my time as mayor stressed the urgency of the other levels of government assisting us by investing in this type of housing to ensure that people have stability within their own lives. have stability within their own lives. You know, I saw you tweet the other day that you think politicians are sort of hosing my generation. And, you know, it didn't strike me that you were talking about a specific level when you tweeted that of municipal, provincial or federal. But do you do you do you feel that? Do you feel that way? Yeah, I absolutely do. And again,

I'm going to lay this on the line. I'm Gen X. To me, millennials are like my little brothers and little sisters, right? So I like to pick on them like any little brother, little older brother or older sister would. But yeah, absolutely. We're okay with that because you guys rushed out to get the AstraZeneca vaccine. There we go. Well, we just wanted to be noticed. Yeah, I just I look at this. And again, I think of my own circumstances when I was in my late 20s and early 30s and all the things that were available to me that are now closed off. I, you know, back in the early 2000s, you know, I was living in London, Ontario.

And, you know, I had considered moving to Toronto. I didn't, but that was at least an option for me. Now, if there's all these sort of great jobs, great opportunities, I want to live and go see Raptors games, what have you. But now I can't do that. So I do think a lot of that falls on the feet of politicians. Now I'm going to play the middle child. I think there has been such a falls on the feet of politicians. You know, now I'm going to play the middle child. I think there has been such a focus on the sort of older generations.

And that's, you know, they have their issues as well. But you look at the situation and just go like, how did things get this bad? You know, we're supposed, you know, we're supposed to have progress. Like things are supposed to get better over time. And I look at what's going on in the housing market and compare it to where it was 15, 20 years ago, and it has just gotten so much worse. And that's not how progress in a society is supposed to work. Every generation is supposed to be better off than the generation that came before it. I look at what's happening with millennials and I can say, no, I wouldn't trade places with you guys. And that's just being brutally honest. And that's not how things are supposed

to work. I'm supposed to be envious of you guys. At least, at least people are starting to talk about it. So Mike, thank you so much for this. I'm very appreciative. Thank you. Well, thank you for having me. Okay, so before I let you go, some difficult news from Afghanistan. Two suicide bombers attacked the area near Kabul's airport on Thursday. Shortly after, gunmen opened fire on crowds there. At least 60 civilians and 12 U.S. soldiers were killed. Many more were wounded. As of Thursday evening, at least 140. An ISIS affiliate in the region claimed responsibility for the terrorist attacks.

The group is a sworn enemy of the Taliban. Earlier the same day, Canadian officials confirmed that they would stop airlifting people out of Afghanistan. More than 6,000 Afghans were previously identified for resettlement in Canada, but only 3,700 Afghans and Canadians got out. Thanks for listening this week. Friend Burner is brought to you by CBC News and CBC Podcasts. The show is produced this week by Simi Bassi, Imogen Burchard, Allie Janes, Katie Toth, and Derek Vanderwyk. Our sound design was by Mackenzie Cameron, Austin Pomeroy, and Julia Whitman.

Our music is by Joseph Chavison of Boombox Sound. The executive producer of FrontBurner this week is Elaine Chao. I'm Jamie Poisson. Thanks so much for listening, and we'll talk to you next week.