The federal budget – what does it mean for housing?

If we are looking for good news, we can certainly look to the federal budget’s focus on housing supply. It is evident from the central focus on both supply and overall housing affordability, that what was once a regional issue centred around Canada’s largest municipalities is now a national one.

One concerning element, however, is the focus on some policies around attempting to artificially suppress demand – a policy focus that Canada’s largest municipalities clearly highlight is not effective. To attempt change to affordability by artificially suppressing demand, the government is aiming at the wrong target.

While TRREB member realtors are encouraged to see a budget that will support their client’s journey to homeownership, all levels of governments must continue to take action to address housing affordability by focusing on the barriers to supply.

The budget includes funding to incentivize municipalities in modernizing their zoning, planning and building approval processes, so that new homes are brought to the market faster. This is a key element, as the federal government has the levers to push municipalities into modernizing their exclusionary zoning laws. Nothing will be more impactful to overall supply and affordability than a review of exclusionary zoning, and a collaborative approach between all levels of government to look at regional opportunities for gentle intensification.

Affordability challenges

The budget has also reserved funding for the construction of affordable and co-op housing units. Other initiatives designed to assist first-time homebuyers with affordability challenges are positive steps, but for GTA buyers specifically, the national nature of these initiatives does not create a level playing field. From an affordability perspective, with a $40,000 contribution maximum, a first-time buyer in the GTA is substantially disadvantaged from a first-time buyer in a much more affordable market in northern Ontario, for example. If the federal government wants to take a good policy and make it a great one, and offer all Canadians an equal opportunity as first-time buyers, we would encourage regional contribution maximums to recognize the very different price realities across the country.

Some policies brought forward in the budget will not have the intended effect, such as the two-year ban on foreign buyers that will begin in 2023. Equating to approximately one to four per cent of transactions in the GTA (depending on the research reviewed), foreign buyers do not have a substantial impact on the imbalance in our housing market. While the concept seems to be politically favourable, the effectiveness of policies aimed at this segment of buyers has been disproven in cities, including Toronto and Vancouver, where foreign buyer taxes have been in place for four years, with virtually no impact on overall affordability.

The challenge facing our housing market is an imbalance between domestic demand and the supply of homes, not an imbalance between domestic and foreign buyers. Governments at all levels should think big and focus on improving much-needed supply in a significant way, rather than on policies that could suggest Canada is not open for business or immigration.

Evidence-based initiatives

So, what can governments do to facilitate the building of more homes? It starts with implementing evidence-based initiatives that address the real cause of affordability challenges, which is an inadequate supply of homes for sale or rent, and to not be distracted by ineffective policies that are popular.

One such key initiative to boost supply is working with municipalities to modernize their exclusionary zoning policies that currently restrict significant neighbourhood areas to single-family homes. There needs to be a strong effort to increase the supply of diverse home types, such as townhomes, plexes and lowrise walk-up apartments. Policymakers must address the needs of all people in the city and bridge the gap between detached homes and condominiums.

Finally, stay up to date on the real estate market by visiting trreb.ca. We share information on new government policies and how they can impact buyers and sellers. Plus, discover our monthly Market Watch report. We break down prices, sales and new listings across the GTA. You can also connect with a TRREB member realtor and search listings in real-time on any device.