Federal government needs to adjust mortgage qualification criteria

Through our national association, the West End Home Builders’ Association (WEHBA) has been urging the federal government to enact measures to increase housing supply and affordability and ultimately ease the current hurdles facing homebuyers. Canada grew by an astounding one million people last year, but the supply of new housing construction isn’t keeping up. On the contrary, residential construction is currently slowing. This explosive growth, in combination with high interest rates, will result in an even more difficult situation going forward. High borrowing rates are incompatible with meeting federal government’s new housing construction objectives, that aim to bring housing affordability to Canadians. Federal action on housing is needed.

The Canadian Home Builders’ Association (CHBA) has recommended several public policy ideas that could quickly be implemented by the federal government. These include a reintroduction of insured 30-year amortizations for first-time buyers, increasing the threshold for the GST New Housing Rebate, greater tax incentives for purpose-built rental developments, and greater federal support for new public infrastructure related with new housing. The combined effect of such measures would significantly increase new housing supply, while helping get first time homebuyers into the market.

Stress test

CHBA CEO Kevin Lee recently stated that, “When it comes to individual homebuying, the stress test has been a barrier and continues to be, and we recommend that it gets adjusted and ratcheted down – especially for longer-term mortgages. We think that steps should be taken to encourage more seven- and 10-year mortgages, rather than the industry-standard five-year term that’s so popular with Canadians because of its security.”

CHBA continues to raise concerns about the stress test and advocates against extra tightening of underwriting that will further suppress the market. The stress test, for both insured and uninsured mortgages, should be ratcheted down to favour longer-term mortgages to better stabilize the market, while supporting first-time buyers.

Another potential change that would greatly assist homebuyers in a higher-cost and higher-interest rate environment would be for both the insured and uninsured mortgage stress tests to be reduced on a declining basis for seven- and 10-year mortgage terms. This would support affordability and improve market stability.

Long-term solution

However, the most significant long-term solution to the housing crisis is to increase housing supply. Here in Ontario, we need to almost double the amount of housing construction and build 1.5 million new homes over the next decade. A balanced housing market where supply meets demand, leads to more stable and predictable housing prices. New home construction of different types and tenures provides a wider variety of housing options, that better meet the diverse needs, budgets and preferences of potential homebuyers and renters. It also benefits the greater economy and livability of our region as it involves new infrastructure and development activities that stimulate economic growth, create jobs and boost related industries.