The federal government has announced new rules for home mortgages designed to “support the long-term stability of Canada’s housing market”. Tougher regulations to block risky financial instruments (like the subprime mortgages that sparked the downfall of the US and global economies in 2008) are welcome, but the federal government urgently needs a comprehensive housing strategy that pays particular attention to the millions of Canadians who are precariously housed.
The Globe and Mail’s Report on Business warns that the net effect of the new rules could be “to eliminate a number of potential buyers from the market”. Since they will still need a place to call home, those households will add pressure to an already unhealthy rental housing market across Canada facing rising rents and shrinking vacancies. The latest federal action to shore up the mortgage market underlines the urgent need for a comprehensive federal housing plan, with a particular focus on the millions of Canadians who are precariously housed. Bill C-304, draft national legislation to create a comprehensive national affordable housing plan, secured the support of a majority of MPs in a Commons vote in November, but it still needs further amendment at committee and a final vote in the Commons.
Slightly more than two-thirds of Canada’s 12.5 million homes are owned, with almost 3.9 million households living in rented housing, according to Statistics Canada. While there was an increase in the number of renters moving into ownership over the past two decades, the new rules will almost certainly slow that trend and could even reverse it. The latest rental market report from Canada Mortgage and Housing Corporation shows rental vacancy rates falling and rents rising.
Even worse, the overall “rental universe” in Canada (the conventional rental housing market) shrank by almost 2,000 units to 1.54 million in 2010. Even though the latest mortgage announcement is expected to send more people into the private rental housing market, the federal government has no strategy for ensuring that they find a healthy and affordable home there.
The mortgage announcement clamps down on exotic financial mechanisms (like very long term mortgages and smaller down payments), but the federal government has taken no steps to support positive and progressive innovations in home ownership (such as Toronto’s Home Ownership Alternatives and its second mortgage mechanism to secure greater affordability). Much of the “innovation” in home financing in recent years went in the wrong direction, but there’s a need to support 21st century home buying options.
The massive withdrawal of federal investments in the 1980s and 1990s has slowed, but the automatic, annual cuts in federal housing investments continue – as noted in the Wellesley Institute’s Precarious Housing in Canada 2010. The federal government urgently needs to consider innovative financing arrangements such as Infrastructure Ontario’s affordable housing loan fund. The Wellesley Institute is calling on the Ontario government to double the loan fund to $1b and tweak the underwriting rules to make sure that it can respond effectively to the capital needs of the province’s affordable housing providers. A federal version of the Ontario loan fund is long overdue.
There are plenty of effective and innovative housing solutions across Canada, as the Wellesley Institute’s housing and homelessness e-map demonstrates. The key challenge is getting access to the financing required to develop and maintain stable, healthy and affordable housing for all Canadians, especially those who are precariously housed. The federal government still has plenty of work to meet that challenge.