Housing Platform Crunch: Liberal Party

By Dr. Alan Walks (Professor, Geography and Planning, University of Toronto), Sean Grisdale (PhD Candidate, Geography and Planning, University of Toronto), and the Affordable Housing Challenge Partnership collective

Summary

The Liberal Party, as the current governing party, began rolling out their National Housing Strategy (NHS) in 2018/9, and their platform proposes to add to and extend this program if elected. Our opinion is that the policies contained in the Liberal platform will not adequately address the root causes of Canada’s housing crisis. The platform does make some long-awaited commitments to funding the renovation of some of Canada’s deteriorating purpose built rental housing stock. It also proposes to add a small amount (20,000 units) of new affordable rental housing to its current NHS commitments of supporting the construction of 160,000 “affordable” rental units. However, it’s important to note that almost half (45 percent) of these 160,000 rental units are planned through the Rental Construction Financing Initiative (RCFI), an NHS program whose affordability requirements are so minimal and so brief as to, in our view, not deserve the title “affordable”. Consequently, we remove the 71,000 units planned through RCFI from our calculation, concluding that the total number of affordable rental units planned through the NHS, should the Liberal’s be elected and follow through on their platform proposal, is 109,000. These are laudable, if modest, ambitions. These policies are also counterbalanced by commitments to new homeownership policies that we argue will make the affordability crisis worse. Indeed, their proposals to expand access to home ownership through a first-time home buyer incentive, and tax-free savings entitlements are only likely to increase house price inflation and household debt. Finally, as with the Conservative platform, the Liberals scapegoat foreign actors for the housing crisis despite evidence that domestic policies, as well as domestic speculators and corporations (eg. REITs and Private Equity firms) play a far more significant role.

Positives:

• Commits to adding 20,000 units of affordable rental housing, bringing their total commitment through the NHS to 109,000 affordable rental units.
• A Beneficial Ownership Land Registry will be key to identifying who owns real estate
• Commits to co-developing an “Urban, Rural and Northern Indigenous Housing Strategy”
• Commits to ending chronic homelessness

Negatives:

• An overemphasis on policies expanding access to mortgages and homeownership will only continue to drive housing price inflation, as well as household debt levels
• Many positive policies would appear to be beyond federal jurisdiction (eg. addressing NIMBYism, inclusionary zoning, public transit, rent controls and eviction bans).
• Overemphasis on foreign buyers as opposed to financialized and corporate buyers (both domestic and foreign)
• Policies addressing domestic speculators and corporations are weak and not likely to be effective

Deep Dive

The Liberal Party of Canada Platform

There are 14 stated policies or policy objectives, some multi-dimensional, in the Liberal Party platform.

1.New Tax-Free First Home Savings Account.

Stated Policy: “A re-elected Liberal government will: Introduce a tax-free First Home Savings Account will allow Canadians under 40 to save up to $40,000 towards their first home, and to withdraw it tax-free to put towards their first home purchase, with no requirement to repay it. Combining the features of both an RRSP and a TFSA, this plan would allow young Canadians to set aside 100% of every dollar they earn up to $40,000 and shorten the time it takes to afford a down payment.”

Will this policy lead to housing that is more affordable? No. In fact, this is certain to make existing housing less affordable on average. Funds put into this new TFFHSA will have to be spent on buying real estate, which will push up overall demand. The additional money from these funds will allow bidders to bid higher prices for the same house. While it may help those who are able to avail themselves of this fund, on average it will mean higher prices for everyone, and lead to greater inequalities related to affordability (see below).

Will this policy lead to the production of new affordable rental housing? No. This policy funnels money only into owner-occupation. By driving up land values in the process, it may make rents less affordable too (as landlords raise rents to cover all their costs).

Will this policy alleviate housing-based inequality? No. In fact, it will increase housing-based inequality. This policy will allow those under 40 years old who have $40,000 in savings to put them into this new TFFHSA and not only receive an immediate tax deduction, but also enjoy tax-free growth inside the fund. How many under-40s have $40,000 in savings? Only those who already enjoy higher incomes than others, perhaps because they have parents who are wealthy and have helped them (with education and training, rental housing costs etc). In fact, it is even more likely that it is the wealthy parents (largely from the boomer-generation) that this policy is targeting. This new fund allows the $40,000 to be gifted, providing wealthy ‘banks of mom and dad’ a new tax-subsidized vehicle for helping their kids get into owner-occupied housing. By providing dual-deductions (both going in, and coming out of the fund) the federal government will provide a significant tax subsidy worth upwards of $12,000 to the select group of borrowers (and their parents) that is able to access it.

Allowing these already-advantaged families even greater advantage will create greater inequality among this age cohort, as well as within the boomer generation (as only the wealthier boomers will have the funds to gift to their kids for this new TFFHSA). Furthermore, by cutting off the eligibility criteria at age 40, this policy will augment further inequalities between generations (why should someone who is 41 be so discriminated against?). This policy is a recipe for creating greater housing-based inequalities and future political divisions between and within generations, and it will be funded by a regressive tax subsidy to already-wealthy people. 

2. More Flexible First Time Home Buyer Incentive

Stated Policy: “In 2019, we launched the First Time Home Buyer Incentive (FTHBI), an innovative new tool that allows middle class families looking to buy their first home, reduce the size of the mortgage they require, and reduce their monthly housing costs. FTBHI is a shared-equity mortgage, where, upon sale, the government incurs a portion of any increase (or decrease) in a home’s value. A re-elected Liberal government will: Allow you to choose between the current shared- equity approach or a loan that is repayable only at the time of sale. This would let you keep more of any increase in the value of your home, while still reducing your monthly mortgage costs.”

Will this policy lead to housing that is more affordable? No. While this could potentially help an individual or family who otherwise might not be able to afford to purchase real estate, other things remaining equal this will add to demand in the more affordable segment of the housing market, and make housing in that segment less affordable on average.

Will this policy lead to the production of new affordable rental housing? No. This policy is only geared at the owner-occupied sector, and not the rental sector.

Will this policy alleviate housing-based inequality? Unclear. There is a possibility that home-buyers that use this program will see their own housing equity grow at slower rates than other home-buyers, for two reasons: 1) a portion of their equity is repayable to the federal government upon sale, reducing the buyer’s equity, and 2) because of the price-stimulating effect among units purchased through this program, those who buy in this segment may have bought at elevated prides and in turn see their long-term equity grow slower than property whose value was not as artificially raised. Saying this, the equity-growth potential of the underlying property assets accessible to those eligible for this program is not likely to have any significant impacts on overall inequality.

3. Reducing Closing Costs for First Time Buyers

Stated Policy: “A re-elected Liberal government will: Double the First-Time Home Buyers Tax Credit, from $5,000 to $10,000, which will put $1,500 in your pocket to make a home purchase a little bit easier.”

Will this policy lead to housing that is more affordable? No. By increasing the total demand, this policy will lead to higher overall prices, although it may (but in fact may not, if prices rise more) help those who are able to take advantage of it.

Will this policy lead to the production of new affordable rental housing? No. This policy is only geared at the owner-occupied sector, and not the rental sector.

Will this policy alleviate housing-based inequality? No. This tax credit is targeted at first-time buyers, which are a highly diverse group.

4. Reduce Your Monthly Mortgage Costs

Stated Policy: “Canadians who have a down payment of less than 20% of the cost of their house or who have a mortgage over $1 million dollars pay insurance premiums that can be up to 4% of the purchase price of a home. On the average Canadian home, this means a homebuyer could be paying close to $30,000 in premiums over the life of their mortgage. Typically, the smaller your down payment is, the higher your premiums. This puts financial pressure on families that can least afford it. A re-elected Liberal government will: Reduce the price charged by the Canadian Mortgage and Housing Corporation on mortgage insurance by 25%. For a typical homebuyer, this will save $6,100 [and] Increase the insured mortgage cut-off from $1 million to $1.25 million, and index this to inflation, to better reflect today’s home prices.”

Will this policy lead to housing that is more affordable? No. It will help stimulate more demand, leading to higher prices on average. It may benefit those who see their premiums drop, but overall those same buyers are likely to see average prices rise as the additional buying power bids up prices.

Will this policy lead to the production of new affordable rental housing? No. This policy is only geared at the owner-occupied sector, and not the rental sector.

Will this policy alleviate housing-based inequality? No. In fact, this policy could lead to greater inequalities in the future. CMHC premiums exist in order to help cover the losses associated with defaults, for instance in the case of a recession when people lose their jobs and can’t afford to make their mortgage payments. With lower CMHC premiums, this means that if a recession hit the federal government would be required to cover more of these losses, and to pay for this may have to reduce spending on other welfare supports, which mostly help low-income households. If this happens, it could increase inequality.

5.“Build, Preserve or Revitalize” 1.4 Million New Homes

Stated Policy Objective: “Our plan will build or revitalize an additional 250,000 homes over 4 years. On top of the 285,000 homes currently being built each year, this will mean nearly 1.4 million homes will be built, preserved, or revitalized by 2025-26 under a re-elected Liberal government.”

And: “The Liberal Housing Plan will support the construction of 100,000 middle class homes, helping more families achieve the goal of home ownership, while also building more than 20,000 more units of new affordable rental housing, and ensuring 130,000 units are revitalized from a state critical disrepair”

Will this policy lead to housing that is more affordable? Highly unlikely. If this policy led to sufficient new supply, it could help alleviate price increases, but the policy is not only about producing new housing, but ‘preserving’ and ‘revitalizing’ existing housing. The policy only forsees adding 100,000 new “middle class” homes over and above what otherwise would have been built, and only 20,000 “new affordable rental housing” units, across the entire nation. Presumably, the remaining 1.28 million units will be ‘preserved’ or ‘revitalized’. These numbers of new units are far too low to affect prices, whether in the rental or ownership sectors. Given the low numbers of new units proposed as a proportion of the total, this policy suggests that the federal government will help pay to renovate existing properties, which could lead to higher overall prices.

Will this policy lead to the production of new affordable rental housing? Yes. 20,000 new units of ‘new affordable rental housing’ are proposed.

Will this policy alleviate housing-based inequality? Unlikely. The number of new units, in either the owner-occupied sector (100,000) or the rental sector (20,000), is really too low to have an effect on housing-based inequalities at the national scale.

5.1. Help Cities Accelerate Housing Construction

Stated Policy: “A re-elected Liberal government will:

• Invest $4 billion in a new Housing Accelerator Fund which will grow the annual housing supply in the country’s largest cities every year, creating a target of 100,000 new middle class homes by 2024-25. This application-based fund will offer support to municipalities that: grow housing supply faster than their historical average; increase densification; speed-up approval times; tackle NIMBYism and establish inclusionary zoning bylaws; and encourage public transit-oriented development. This fund will support a wide range of eligible municipal investments, including red tape reduction efforts, and reward cities and communities that build more homes, faster.
• Help speed up the time it takes to build more homes by investing in e-permitting technology and help communities streamline the planning process.
• Work with municipalities to identify vacant or underused property that should be converted to housing on the principle of use it or lose it.”

Will this policy lead to housing that is more affordable? Unlikely. As noted above, the number of new units is quite low compared to the underlying need, and will have little affect on prices. It is also unclear whether the municipal approvals process is actually a problem, excepting the problems of NIMBYism which have been present in Canadian cities for over a century. But the federal government has no jurisdiction to intervene in municipal affairs, except for the case of housing for Indigenous residents. It is unclear whether the federal government can actually affect municipal decisions.

Will this policy lead to the production of new affordable rental housing? No. The policy only mentions building ‘100,000 new middle class homes by 2024-2025’, and does not mention rental housing at all. This is despite the fact that NIMBYism mainly affects rental housing, not owner-occupied or middle-class housing.

Will this policy alleviate housing-based inequality? Unclear. If the federal government were actually able to help alleviate NIMBYism, there is potential for reducing housing-based inequalities. But the federal government does not have jurisdiction over municipal affairs (municipalities are the ‘creatures of the Provinces’), except in the case of housing for Indigenous peoples. But the policy does not even mention Indigenous peoples, or the rental housing the is usually the target of NIMBYism.

5.2. Build and Revitalize More Affordable Housing

Stated Policy: “A re-elected Liberal government will: Permanently increase funding to the National Housing Co-investment fund by a total of $2.7 billion over 4 years, more than double its current allocation. These extra funds will be dedicated to helping affordable housing providers acquire land and buildings to build and preserve more units, extending the model of co-operative housing to new communities, accelerating critical repairs so that housing supply remains affordable and is not lost, and developing projects for vulnerable groups, such as women, youth, and persons with disabilities.”

Will this policy lead to housing that is more affordable? Yes. While the devil is in the details (which are not spelled out in this policy), if cooperatives and other affordable housing providers are provided with more funds they wil be able to reduce their costs and pass this along to households. It is not clear exactly how many units would be affected though.

Will this policy lead to the production of new affordable rental housing? Yes. The policy states that these ‘extra funds will be dedicated to helping affordable housing providers acquire land and buildings to build and preserve more units’. It remains unclear how many units will be affected by this policy, but the overall objective states that 20,000 new units of affordable rental housing will be built, so this is likely the target number for this policy.

Will this policy alleviate housing-based inequality? Yes, but by a small amount. Even if all 20,000 new units of affordable rental housing are built, this is a very small number in relation to the underlying need.

5.3. Convert Empty Office Space into Housing

Stated Policy: “A re-elected Liberal government will: Double our existing Budget 2021 commitment to $600 million to support the conversion of empty office and retail space into market-based housing. We’ll convert space in the federal portfolio, and commercial buildings [and] Work with municipalities to create a fast-track system for permits to allow faster conversion of existing buildings, helping maintain the vibrancy of urban communities.”

Will this policy lead to housing that is more affordable? Unclear. The kinds of housing that will  be produced out of the former office space is not specified.

Will this policy lead to the production of new affordable rental housing? Unclear. It is not clear what kind of housing the former office space will be converted to, nor how many units this might produce. The details are missing.  

Will this policy alleviate housing-based inequality? Unclear. Apart from the question of whether this might help alleviate housing affordability problems, this policy also raises questions about where people living in cities might work. Is this policy based on an assumption that the pandemic has permanently restructured live-work relations, and that many people currently working from home will continue to do so? If offices and retail spaces are converted to housing, there will be less space available for employment, especially in areas where traditionally one found higher concentrations of rental housing. If those jobs disappear, will renters need to buy cars in order to commute the longer distances where the remaining places of work are found? During the pandemic, renters were more likely to work in jobs that required them to come to the job site.

5.4. Help Bring Different Generations Under One Roof

Stated Policy: “A re-elected Liberal government will: Introduce a new Multigenerational Home Renovation tax credit to help families add a secondary unit to their home for an immediate or extended family member. Families will be able to claim a 15% tax credit for up to $50,000 in renovation and construction costs, saving up to $7,500.”

Will this policy lead to housing that is more affordable? Potentially. This policy could help alleviate pressure on existing rental units, by bringing family members back into the family home in new units.

Will this policy lead to the production of new affordable rental housing? Yes. The policy is meant to subsidize some of the costs of creating new units within the family home. It is unclear how many new units are envisaged as resulting from this policy.

Will this policy alleviate housing-based inequality? Unclear. This policy would help households who have space in their existing family homes to turn that space into separate units. It will therefore subsidize homeowners will larger houses, who are statistically wealthier on average (although there is much variation), and will benefit the family members of these higher-income households. But the freed-up space in the rental market could help alleviate some of the pressure on rising rents, benefitting others trying to find housing in the existing rental market. Once again, the devil is in the details, which are not provided in the platform.

6. New Rent-to-Own Program

Stated Policy: “A re-elected Liberal government will:

• Introduce a new rent-to-own program to help make it easier for renters to get on the path towards home ownership while renting. The program will be designed based on three principles: the landlord must commit to charging a renter a lower-than- market rate to help Canadians build up savings for a down payment; the landlord must commit to ownership in a five-year term or less; and proper safeguards will be in place to protect the future homeowner.
• Create a stream for current renters and landlords, particularly those in condo settings, to immediately enter into a rent-to-own agreement.
• Commit $1 billion in loans and grants to develop and scale up rent-to-own projects with private, not-for- profit, and co-op partners.”

Will this policy lead to housing that is more affordable? Unclear overall. On average by taking units out of the traditional owner-occupied market this program could lead to rising prices in that market. But by requiring that rents be lower than the market rent, it could lower average rents across the board (but may not affect the actual rents of those outside the program). Of course, those who meet the criteria for this program (but who otherwise would have remained renters) should benefit. Saying this, the policy is to provide ‘loans and grants to develop and scale up rent-to-own projects with private, not-for-profit and co-op partners’. Does the latter mean that this program will also be used to turn existing rental housing currently located in cooperatives and non-profits into owner-occupied housing? If so, this could mean a reduction in the number of rental units, and seriously impact the ability of cooperatives and non-profit housing providers to deliver their services, making rental housing more expensive. This is another policy where the devil is in the details, yet there are not sufficient details provided.

Will this policy lead to the production of new affordable rental housing? Unclear. The policy  appears intended to merely convert already-existing or already-planned units into rent-to-own units.

Will this policy alleviate housing-based inequality? Unclear. In other nations (such as the United States), rent-to-own programs have a chequered history, with many private rent-to-own programs actually working as vehicles for dispossession and equity-stripping. This is obviously not the intention here, but more detail will be needed before any assessment of the equity effects of this policy can be undertaken.

6. Support Indigenous Housing

Stated Policy: “A re-elected Liberal government will:

• Work with Indigenous partners to co-develop an Urban, Rural, and Northern Indigenous Housing Strategy and support this strategy with dedicated investments.
• Work with Indigenous partners to create a National Indigenous Housing Centre with Indigenous people overseeing federal Indigenous housing programs once fully realized.
• Make additional investments in First Nations, Inuit, and Métis Nation housing, as we continue to work towards meeting our 2030 commitment on closing the gaps for Indigenous Infrastructure.”

Will this policy lead to housing that is more affordable? Hopefully (but unclear). There is not enough detail in the policy statement to actually assess this question

Will this policy lead to the production of new affordable rental housing? Hopefully (but unclear). The policy is to “Make additional investments”. Does this mean building new housing? Or repairing existing housing? There are not enough details in the policy statement to answer this question.

Will this policy alleviate housing-based inequality? Unclear. Again, there is not enough detail provided to answer this question.

7. End Chronic Homelessness

Stated Policy: “A re-elected Liberal government will: Appoint a new Federal Housing Advocate within the first 100-days of a new mandate to ensure the federal government’s work toward eliminating chronic homelessness, as well as other housing commitments, are fulfilled, [and] Move forward with our plan to invest in Reaching Home: Canada’s Homelessness Strategy to support communities across the country.”

Will this policy lead to housing that is more affordable? Hopefully (unclear). The appointment of a Federal Housing Advocate is a positive objective. Not enough detail is provided about how this might affect affordability.

Will this policy lead to the production of new affordable rental housing? Unclear. There is no mention of building new housing units.

Will this policy alleviate housing-based inequality? Hopefully (maybe). If chronic homelessness could be ended, or even partly ameliorated, this would really help to reduce housing-based inequalities. But the data needed to assess the equity outcomes of this policy are not present in the statement.

8. Home Buyers’ Bill of Rights

Stated Policy Objective: “A re-elected Liberal government will: Create a national Home Buyers’ Bill of Rights so that the process of buying a home is fair, open, and transparent. [and] Convene federal and provincial regulators to develop a national action plan to increase consumer protection and transparency in real estate transactions.”

And: “The Home Buyers’ Bill of Rights will:

• Ban blind bidding, which prevents bidders from knowing the bids of other prospective buyers, and ultimately drives up home prices.
• Establish a legal right to a home inspection to make sure that buyers have the peace of mind that their investment is sound.
• Ensure total transparency on the history of recent house sale prices on title searches.
• Require real-estate agents to disclose when they are involved in both sides of a potential sale to all participants in a transaction.
• Move forward with a publicly accessible beneficial ownership registry.
• Ensure banks and lenders offer mortgage deferrals for up to 6 months in the event of job loss or other major life event.
• Require mortgage lenders act in your best interest so that you are fully informed of the full range of choices at your disposal, including the First Time Home Buyer Incentive.”

Some of these policies are within federal jurisdiction, but others are within provincial jurisdiction. To deal with this problem, we have separated these policies into two batches:

8.A – Those aspects of the ‘Home Buyer’s Bill of Rights’ that are under Provincial Jurisdiction:

• Ban blind bidding, which prevents bidders from knowing the bids of other prospective buyers, and ultimately drives up home prices.
• Establish a legal right to a home inspection to make sure that buyers have the peace of mind that their investment is sound.
• Ensure total transparency on the history of recent house sale prices on title searches.
• Require real-estate agents to disclose when they are involved in both sides of a potential sale to all participants in a transaction.

Will this policy lead to housing that is more affordable? Not likely. Blind bidding, optional home inspections, and full disclosure by agents, have been the norm for many years in a number of provinces already, even in times when prices rose much more slowly. Transparency of house sales is an excellent idea for establishing fairer and more transparent markets. But Nova Scotia has publicly released transparent sales histories for many years, and it suffered just as bad of a rapid price increase in the cost of housing as the rest of the country during the pandemic. Not only do these measures appear to have minimal effect on prices, but they are under provincial jurisdiction, so it is unclear how the federal government expects to accomplish these goals.

Will this policy lead to the production of new affordable rental housing? No. These measures only affect existing housing.

Will this policy alleviate housing-based inequality? Not likely. Making sure that transactions are fair and transparent, and that there is full disclosure of the interests of agents, will improve the perception and legitimacy of real estate markets, and could perhaps reduce fraudulent activity. But it is not clear that this would have much of an effect in reducing material inequalities.

8.B – Those aspects of the ‘Home Buyer’s Bill of Rights’ which are under Federal Jurisdiction:

• Ensure banks and lenders offer mortgage deferrals for up to 6 months in the event of job loss or other major life event.
• Require mortgage lenders act in your best interest so that you are fully informed of the full range of choices at your disposal, including the First Time Home Buyer Incentive.”
• Move forward with a publicly accessible beneficial ownership registry.

Will this policy lead to housing that is more affordable? Yes, slightly. By requiring lenders to offer mortgage deferrals, and act in the best interest of borrowers, they will need to charge higher average interest rates on uninsured mortgages, and be more open about borrowing options. The higher interest rates should help keep demand more stable (helping, in some small way to alleviate rapid price rises). Doing a better job at informing borrowers about their options should mean that borrowers are better matched with mortgage products that meet their needs, including lower-priced options, and better able to avoid predatory forms of lending. Note that this policy could only apply to federally-regulated lenders (like the large banks) and not the provincially-regulated lenders (like credit unions).

Will this policy lead to the production of new affordable rental housing? No. These policies mainly relate to existing housing.

Will this policy alleviate housing-based inequality? Yes. Borrowers who lose their jobs will not have their housing taken away in the first six months, providing some relief in the case of unemployment. This will help to partially decouple housing loss and job loss, providing more stability to housing careers. This is will be particularly beneficial for children living in affected households, as they will not have to move as often and/or in such highly-stressful situations. The latter (children moving often between units) has been found to affect well-being later in life. Furthermore, it is low-income households that will benefit the most from requiring lenders to act in their best interests, as low-income households are disproportionately affected by ‘mis-selling’, predatory lending, and other kinds of lending that take advantage of a household with fewer options.  Making the beneficial ownership registry publicly accessible would allow the public to see who owns each property, which will enhance democratic procedures and perhaps put pressure on owners to be more responsible with tenants.

9. Keep Your Rent Fair

Stated Policy: “To help better protect renters, a re-elected Liberal government will: Stop “renovictions” by deterring unfair rent increases that fall outside of a normal change in rent. [and] Require landlords to disclose, on their tax filing, the rent they receive pre- and post-renovation, and implement a proportional surtax if the increase in rent is excessive.”

Will this policy lead to housing that is more affordable? Yes. While once again the devil is in the details, more scrutiny of rent increases, and penalties for above-guideline rent increases (rent increases that are above the annual guideline set by the province, in those provinces that practice such guidelines), could help protect existing tenants from ‘renoviction’ (evicting the tenant explicitly in order that renovations can be made that increase the chargeable rent on a unit). Saying this, rent control is not within federal jurisdiction. And the Liberal Party has not said it would prevent CMHC mortgage guarantees from being used by ‘renovictors’ (which the NDP has promised). It is unclear just how much power the federal government would have to influence patterns of renoviction merely through federal tax policies.

Will this policy lead to the production of new affordable rental housing? No. This policy will only apply to existing housing, and is not meant to increase the supply of rental housing.

Will this policy alleviate housing-based inequality? Yes. Low-income households are far more likely to face eviction and ‘renoviction’, and any protection they can be granted will disproportionately benefit them, creating a more equitable rental landscape.

10. Curb Speculation and House Flipping

Stated Policy: “To reduce speculative demand in the marketplace and help to cool excessive price growth, a re-elected Liberal government will: Establish an anti-flipping tax on residential properties, requiring properties to be held for at least 12 months. Canadians who encounter changes in life circumstances due to, for example, pregnancy, death, new jobs, divorce, or disability will be exempt from this policy. As this tax is introduced rules will be established to ensure that sellers subject to this tax are able to deduct legitimate investments in refurbishment.”

Will this policy lead to housing that is more affordable? Not likely. The policy only applies this tax to sales within the first 12 months, so would-be ‘flippers’ might be expected to now wait 13 months. At any rate, it is not clear that most ‘flippers’ always do their flipping in the first 12 months. This policy will not likely have much of an effect on actual housing investment or behaviour.

Will this policy lead to the production of new affordable rental housing? No. This policy only applies to sales of existing housing.

Will this policy alleviate housing-based inequality? Not likely. Given this new tax is not likely to actually reduce speculation, it is not likely to reduce speculation-induced forms of housing inequality either.

11. Crack Down on Foreign Ownership

Stated Policy: “A re-elected Liberal government will:

11.A. Ban on Foreign Buying

• Ban foreign money from purchasing a non- recreational, residential property in Canada for the next two years, unless this purchase is confirmed to be for future employment or immigration in the next two years.

Will this policy lead to housing that is more affordable? Not likely. Even before the pandemic, available statistics suggest that foreign buyers were only a small fraction of the total market: after British Columbia and then Ontario instituted taxes on foreign buyers, their share dropped to very small numbers. The pandemic has reduced this further. The rapid rise in prices during the pandemic is due to Bank of Canada’s ‘Quantitative Easing’ program, in which the Bank purchases government bonds, and mortgage-backed securities, in order to bring mortgage rates and other interest rates down, as well as the federal government’s Insured Mortgage Purchase Program (IMPP), in which the federal government has purchased very large numbers of qualifying mortgages from the banks, taking the risk off the banks and spurring them to lend more, to more people. A ban on foreign buying will have no direct effect on this, and in turn, on current prices.

Furthermore, the ban will only apply to ‘non-recreational, residential property’, meaning that foreign buyers will *still* be able to purchase property for recreational use (cottages, ski resorts, etc), as well as purchase property for agricultural use. This policy will not prevent agricultural land from being bought up by foreign companies.

Will this policy lead to the production of new affordable rental housing? No. The policy has little to do with rental housing production.

Will this policy alleviate housing-based inequality? Not likely. Might this policy prevent a new wave of foreign buying post-pandemic? There is no evidence that such a wave is imminent, but perhaps this policy could prevent one from occurring if such a wave were to emerge in a world divided by covid-based safety concerns. On this, one can only guestimate. However, a policy like this makes it seem like foreign buying is one, or perhaps THE, cause of the housing affordability crisis, when in fact there is no evidence of this; but the perception can lead to greater inequalities as a result of rising racism, xenophobia and discrimination.

11.B. Non-Resident Tax on Vacant, Underused Housing

• Extend Canada’s first-ever national tax on non- resident, non-Canadian owners of vacant, underused housing, announced to begin on January 1, 2022 to include foreign-owned vacant land within large urban areas.
• Work with provinces and municipalities to develop a framework to better regulate the role of foreign buyers in the Canadian housing market so that this money does not deter housing from being available for, and used by, Canadians.”

Will this policy lead to housing that is more affordable? Unlikely. There is currently not enough data on the extent to which non-residents own vacant, underused housing. If the latter is extensive, then a national tax could spur owners to rent out more of this underused housing into the long-term rental market, or perhaps offer it for sale, in turn providing more competition in the housing market. Current data suggest that non-resident ownership is not substantial, however. Until there is sufficient data on non-resident ownership, the true impact of this policy remains unknown.

Will this policy lead to the production of new affordable rental housing? No. This policy applies to existing vacant, underused housing.

Will this policy alleviate housing-based inequality? Unclear. Because of insufficient data, it is not possible to assess whether this policy would have much of an effect, nor what kind of effect, on prices, rents, and the level of housing-based inequality.

12. Stop Excessive Profits in the Financialization of Housing

Stated Policy: “Large corporate owners of residential properties such as Real Estate Investment Trusts (REITs) are amassing increasingly large portfolios of Canadian rental housing, making your rent more expensive. Homes should be for people to live in, not financial assets for investment funds to speculate on. A re-elected Liberal government will:

• Review the tax treatment of these large corporate owners.
• Put in place policies to curb excessive profits in this area, while protecting small independent landlords.
• Review the down payment requirements for investment properties.”

Will this policy lead to housing that is more affordable? Potentially. REITs and other large real estate asset management firms have been purchasing increasing numbers of rental buildings across the country, and then raising rents, with those rents flowed out to investors. Many of these firms seek to evict existing tenants after buying up the buildings so they can charge higher rents to new tenants. This leads not only to eviction, but higher average rents. Any attempt to dampen this type of behaviour should help maintain affordability. However, the policy only suggests that the federal government will ‘review the tax treatment’ of these firms and ‘put in place policies to curb excessive profits’. But what are ‘excessive’ profits? The federal government will apparently allow these practices to continue as long as the profits are not ‘excessive’ by their definition. They are not promising to stop the evictions or rent increases, so it is not clear how much of an impact this policy will have, if any. The proposal to “review the down payment requirements for investment properties” is too vague a statement to make any assessment of it. It is not clear that downpayment requirements are a major factor that is stimulating the financialization of rental housing.

Will this policy lead to the production of new affordable rental housing? No. REITS and other larger real estate asset managers generally purchase existing rental housing (not build new housing), and this policy itself says nothing about spurring the production of any new rental housing.

Will this policy alleviate housing-based inequality? Potentially. Again the devil is in the details. If the federal government merely moves to reduce ‘excessive’ profits, but allows these types of firms to otherwise continue with their general practice of evicting tenants so that they can raise rents with new tenants, then this policy will not have much of an effect.

13. Protect the Stability and Security of the Housing Market

Stated Policy: “To strengthen federal oversight of the housing market, a re-elected Liberal government will:

• Establish the Canada Financial Crimes Agency as Canada’s first ever, national law enforcement agency solely dedicated to investigating and combatting all forms of major financial crime.
• Increase the power of federal regulators to respond to housing price fluctuations and ensure a more stable Canadian housing market.”

Will this policy lead to housing that is more affordable? Potentially. This new Canada Financial Crimes Agency could provide data that is currently lacking, and help policy-makers create policies that better address financial fraud. All of that is welcome. But the second promise to ‘increase the power’ of regulators to deal with house price fluctuations is woefully under-explained. Federal regulators currently have enough power to respond to house price fluctuations if they choose, and they have done so by modifying lending criteria from time to time, including and particularly in relation to mortgages. It is not clear why they might need more power than this, or what extra powers are being suggested. Why haven’t they used the powers they already have to reduce speculation and risky lending? What new powers are being suggested?

Will this policy lead to the production of new affordable rental housing? No. This policy does not directly relate to the rental housing market.

Will this policy alleviate housing-based inequality? Potentially. Financial fraud is disproportionately harmful to lower-income borrowers, and any attempt to reign it in will help reduce predatory forms of lending and protect vulnerable borrowers. It is not clear how new regulatory powers meant to enhance price stability would affect housing-based inequalities though.