Weighing in on the stress test

As a local Editor-at-Large, I talk to lots of people and hear lots of stories and while I try to accentuate the positive, sometimes reality can’t be ignored.

Such is the case with the Office of the Superintendent of Financial Institutions’ (OSFI) mortgage ‘stress test’, introduced to prevent a mortgage bubble crisis such as occurred in the U.S. a few years ago. While the rules do prevent some folks from taking on mortgages at the extreme limits of their financial resources, many feel the rules are too strict and prevent some legitimate homebuyers from realizing their dream.

On June 10, the OSFI published an information sheet for its B-20 guideline, which covers residential mortgage underwriting practices, stating, “The revisions to B-20 are working; strengthening mortgage underwriting across Canada and improving the resilience of the Canadian financial system to future shocks. While improvements have been made, OSFI will continue to monitor lender practices, particularly in the area of income verification, and will be proactive with lenders when it identifies areas requiring attention.”

OSFI said the updated guideline is intended to tackle growing risks amid low interest rates and housing market imbalances, but the stress test has faced pushback from the real-estate industry and concern from some politicians.

BILD CEO bullish on Calgary

The local residential land development and home building industry is peopled by Calgary builders and developers who are some of the most solid community-minded citizens in town. Like Brian Hahn, who took over as CEO of Building Industry and Land Development (BILD) Calgary in January. A native Calgarian, Hahn grew up in North Haven and attended James Fowler High School. After attending the University of Portland on a soccer scholarship, he returned to Calgary, landing a job as a labourer with Springer Construction.

Little did anyone know that Hahn would come full circle. After a 30-year stint with ATCO Group and taking a run at an Olympic bid as GM of the Calgary Bid Exploration Committee, Hahn was retired and volunteering at the Alberta Adolescent Recovery Centre when he got word of the opportunity at BILD.

“The people involved in the local home building industry are totally ‘switched-on’ in terms of giving back to the community,” he says of BILD’s 685-plus members. “This is an industry that’s done much, much more for Calgary than just build homes. Calgarians are ‘take charge’ folks, there’s always challenges – it’s how you meet, with enthusiasm and a can-do attitude, then that creates opportunity.”

As for the current state of the local housing industry, “We’re not completely out of the woods yet, in terms of economic recovery, but there is a sense of optimism and some rays of sunshine are starting to peek through.”

Housing Starts

Rather than just looking at the raw June housing start numbers from the Canada Mortgage and Housing Corp. (CMHC), I thought it might be interesting to look at where most new-home building activity is in Calgary. It’s always fun to see if expectations are supported by reality. And, of course, I like to compare starts to last month’s and last year’s numbers as well.

Looking at starts by area, there are a couple of things that jump out right away. For one, there were zero apartment or row starts downtown in June. None. And only one single-family home, likely an infill, and one duplex – which counts as two homes. The beltline, on the other hand, saw 137 apartment starts to go with one single-family build, which is about what one would expect. Seems downtown has slowed down.

Meanwhile, other areas are all over the map as far as new-home starts and type of dwelling. The southwest boasted 216 total starts, with 30 single-family and 159 apartments. This speaks to the number of condos being developed in the quadrant. In the northwest, starts are spread out fairly evenly between single-family, semi-detached, townhomes and apartment dwellings. In the northeast, not as many starts are happening, but a far greater percentage are single-family. These numbers are handy for providing a snapshot of what’s being built and where.

Looking at the overall numbers for June, although the year-to-date totals still lag behind 2018 by about 20 per cent, June looked pretty good compared to last year and last month, thanks to some new townhome starts. Summer is traditionally a slower time, so it will be interesting to see what July and August brings. Better weather would definitely help.