While the shutdown of the United States government has been the topic of conversation from economists to school teachers this past week, a small, but important, letter was sent to the federal government by the Federation of Canadian Municipalities (FCM).
The FCM, representing over 90% of the population, urged the Prime Minster Stephen Harper in their October 1st letter, to use the upcoming throne speech as a platform to implement a plan to help reduce the cost of housing in their communities.
The letter stated that the exorbitant cost of housing is “the most urgent financial issue facing Canadians.” Although the FCM supports the steps the government “has rightly taken” to limit burgeoning mortgage debt, one in four Canadians was living in unaffordable housing. The letter, signed by FCM president, Claude Dauphin, mayor of the Montreal borough of Lachine, also admonishes that “[h]ousing costs and, as the Bank of Canada notes, household debt, are undermining Canadians personal financial security, while putting our national economy at risk.” Dauphin also points out that the limited number of rental units is also forcing rental rates to increase, leading to a challenge for housing workers in areas undergoing strong economic growth.
The letter was also critical of the lack of subsidized housing, which was “pushing some of the most vulnerable Canadians on to the street.”
The federation supports the idea that the Canadian government, via the Canadian Mortgage Housing Corporation (CMHC), should back low-interest mortgages on older building to assist with the cost of maintenance and other expenses.
The letter also advocated the government fulfill its new 10-year, multibillion dollar infrastructure mandate along with the recent pledge by Transport Minister Lisa Raitt to focus on public safety and the transportation of dangerous goods in the aftermath of the Lac-Mégantic train disaster.
In my opinion, although the letter may be well meaning, it fails to consider even its own idea of the “limited but critical role” of the government. The fact is that the government has already artificially adjusted housing prices in an effort to reduce the prospect of a perceived “bubble”, and force Canadians into more stringent qualification measures when purchasing or refinancing a home. Requesting the government to provide subsidized financing for older homes would result in an increasing demand for this subsection of the market. In turn, this will cause the exact problem that the municipalities are seeking to avoid. If we are going to seek subsidization, I believe a more crafted approach would be to have part of the costs associated with new construction subsidized by the federal government with the specific intent of ensuring the savings are passed on to the end consumer. Regulating new construction would be much simpler than regulating the existing market and would potentially have the positive effect of job growth, economic productivity, and an increase of housing supply that the FCM is so intent on hammering home. Regardless, it is important that the municipalities do not overstep their bounds, along with the federal government, in attempting to control the housing market in whole.
Regardless, if you’re thinking about making a switch, purchasing a home, or refinancing your mortgage, contact your REALTOR® & Mortgage Broker, or feel free to give us a shout, and We’ll be happy to chat.
REALTOR® and Senior Private Loan Specialist - Residential & Commercial
Century 21 Desert Hills Realty and EQ Lending Corp.
Broker/Owner of EQ Lending Corp.