Home ownership offers significant benefits to communities. Foremost are the number of jobs and spin-offs created every time a home changes hands.
In Metro Vancouver last year (2016), 39,943 homes sold, generating an estimated $2.5 billion in economic spin-off activity and 17,600 jobs. The total dollar value of residential sales transacted through the Multiple Listing Service® in the region totalled $40 billion last year.
The rising cost of homes in the region has, however, made home ownership increasingly difficult to attain. Residential real estate values in Metro Vancouver have risen 80 per cent over the last 10 years and detached home prices have surged 110 per cent.
These increases underscore concerns about how our children and newcomers can afford a home, and how the most vulnerable among us can find basic shelter, and have led to heated debates about possible solutions.
Governments at the provincial and municipal levels have responded with new taxes as a solution. But taxation doesn’t directly improve supply or reduce the cost of homes.
The Real Estate Board of Greater Vancouver (REBGV) has a long history of making progressive recommendations to government including on ways to improve affordability.
Here are the REBGV’s six recommendations to improve affordability.
1. The Home Buyers’ Plan (HBP)
The HBP has helped more than 2.9 million Canadians become home owners since its inception in 1992. This program allows first-time home buyers to borrow up to $25,000 ($50,000 per couple) from their RRSP to use as a down payment toward buying a home. But since 1992, the HBP has lost $5,500 in purchasing power and $2,700 since it was last adjusted in 2009.
Recommendation: Index the HBP withdrawal limit to the Consumer Price Index and adjust it in $2,500 increments to prevent inflation eroding its value. Extend the HBP to home owners experiencing significant life changes such as a job relocation, accommodating an elderly family member, the death of a spouse, or a marital breakdown.
2. Help increase the supply of transit-oriented affordable homes
In Metro Vancouver, low and moderate income households often face a trade-off between housing and transportation costs. To find more affordable housing, residents must move further from the urban core. Transportation costs increase, negating savings on housing costs.
Recommendation: Transit-oriented development ensures that land and transit are used more efficiently. The federal government can provide funding to local governments and transit authorities on the condition that local government:
- uses the funding to buy land near transit;
- rezones it for higher density development including duplexes, townhouses, stacked townhouses and small in-fill houses;
- offers it for sale at below market rates to developers who build affordable market and rental housing geared to households earning less than $75,000; and
- provides covenants on the property title to minimize windfall profits on subsequent sales.
The federal government can also work with provincial governments to provide financial incentives to municipalities fast-tracking medium-density projects such as townhomes, co-housing, cooperatives and other forms of tenure close to transit including collective living (allows five or more unrelated residents to live together).
Incentives would help defray the costs of accelerated planning and rezoning at the municipal level. Governments should form partnerships with developers, builders and other private sector and non-profit housing providers to bring more affordably priced units onto the market in transit-friendly locations that would help defray transportation costs for residents.
3. Help increase the supply of affordable market and rental homes
The root cause of rising home prices is our growing population. Although there is a cycle to prices, over the long term, despite interest rate and market changes, prices will rise because of demand. There is an inevitability to this trend.
Recommendation: The federal government can:
(a) undertake research to explore and clarify the root causes of property prices in Canada so that decisions are fact-based.
(b) step in to help increase supply. Various federal agencies such as Canada Mortgage and Housing Corporation, the Department of National Defence and the Royal Canadian Mounted Police own land in Metro Vancouver. When it is declared surplus, the federal government could:
- offer it at a lower price to developers who build affordable market and rental homes for low-income households; and
- provide tax credits to developers building affordable market and rental homes.
4. Help increase the supply of affordable rental homes through incentives
Vancouver’s development history proves that investors will build affordable rental homes if they are given incentives.
(a) Allow rental investors to defer taxes on the recapture of previously accumulated depreciation (Capital Cost Allowance) when they sell a rental investment property such as a rental apartment building, and reinvest in another similar property of greater or equal value.
(b) The provincial government should reinstate rental investment programs to increase the supply of purpose-built rental housing.
5. Stop taxing home buying
6. Consult before initiating more changes to mortgage rules
Home buyers in Metro Vancouver face major hurdles when it comes to buying an affordable home. These include saving for a down payment, trying to find an affordable home when the supply is limited and saving for a range of taxes such as the provincial Property Transfer Tax and the federal Goods and Services Tax on the many services associated with home buying.
Recommendation: Refrain from introducing any new taxes on home buying.
Low-ratio borrowers, including first-time buyers, bore the brunt of the new mortgage rules introduced in October, and experience a steep decline in housing affordability.
Recommendation: Consult with a variety of real estate stakeholders, including real estate boards and their Realtor members, who understand the needs of home buyers, before introducing new measures.