Artificial system

Housing industry questions ‘artificial’ demand measures in federal budget

Written by
Penelope Graham

That yesterday’s federal budget took such a tough stance on housing is very encouraging, but some of the announced policies miss the mark: that seems to be the general consensus among real estate industry groups, who have called for reforms to lighten the reality of the nation. real estate supply and affordability crisis.

The 304-page budget included sweeping measures to temper runaway price growth and boost much-needed supply in the market, including a two-year ban on foreign buyers, property taxation and a pledge to spend $10.2 billion dollars over the next five years. years to build more than 100,000 affordable, market-priced units.

The fact that housing – and supply creation – takes the top spot has been applauded by estate agents, but questions have been raised about the real effectiveness of some “artificial” demand-side measures , such as preventing non-Canadian homebuyers from buying property.

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“Government initiatives to artificially suppress demand are aiming at the wrong target. Previous demand-side government actions have clearly not had the desired effect,” said Toronto Regional Real Estate Board Chairman Kevin Crigger.

“Unfortunately, the federal government seems poised to repeat the same mistake by focusing on banning foreign buyers who continue to represent a small slice of the overall market. It’s important that governments do the right thing by implementing proven, evidence-based measures that address the real issues and don’t get sidetracked by what’s popular.

He adds that the ban could also have unintended consequences for overall population growth in the Greater Golden Horseshoe region which is not growing, on the net, without immigration.

“Population growth is necessary to support continued economic growth,” he adds.

However, Council is in favor of policy changes targeting the supply creation process at the municipal level; The $4 billion Housing Acceleration Fund will help streamline housing construction and approvals so homes can get to market faster.

“The federal government has the levers to push municipalities to modernize their exclusionary zoning policies, and should use that lever. Committed funding for affordable housing construction and for housing co-ops will also help in this regard,” continued Crigger.

More details needed on supply delivery

The Home Builders Council of Ontario (RESCON) agrees that the focus on supply is a welcome development, but raises doubts as to how the proposed measures will actually translate to building a more large number of houses.

“The government has said it has earmarked $10 billion to help ease the housing crisis, but many of the proposals are demand-side measures, such as helping people save for a down payment,” said RESCON Chairman Richard Lyall. “We have a significant housing supply shortfall in Canada and there is a lack of detail on how these measures will increase the housing stock.”

Canada ranks 34th out of 35 OECD countries in terms of new housing delivery timelines and last among G7 countries in terms of unit production.

“As Finance Minister Chrystia Freeland has pointed out, there is no quick fix to the problem,” Lyall said. “While we are pleased that the government has identified the housing supply crisis and is taking action, we need more information on how these measures will accelerate the construction of new housing.”

The industry body is encouraged, however, by moves to increase the number of people with construction skills coming to Canada, a key development to replenish a rapidly depleting workforce. A $29.3 million trusted employer model will streamline the hiring process for employers who have used the Temporary Foreign Worker Program and have credible employment and labor standards. An additional $84.2 million will be spent over four years to fund the Union Education and Innovation Program, an apprenticeship matching initiative.

According to RESCON, more than 92,000 construction workers are expected to retire by 2030 in Ontario, meaning the industry will need to hire, train and retain more than 100,000 people over the decade.

READ: Canada desperately needs more immigrants with specialized skills as shortage looms

“It is essential that we bring more young people, women and people from BIPOC communities into the trades,” said RESCON Vice President Andrew Pariser. “We face a shortage of certain trades if we do not train more people in training. We especially need people with specialized skills in the residential construction industry.

How will the housing market react?

Meanwhile, an economist at one of Canada’s biggest lenders predicts the market will take a “more cautious stance following Budget 2022” as buyers and sellers assimilate the new developments.

“…we believe that the magnitude of the measures announced in this budget will make a strong impression on the market. Large housing projects introduced by British Columbia in 2016 and Ontario in 2017 caused market players to pause (briefly) while they weighed the implications. Minister Freeland’s housing budget has the potential to do the same,” writes Robert Hogue, senior economist at RBC.

“The series of federal measures comes a week after Ontario and Nova Scotia announced new or increased taxes on foreign buyers, and less than a week before the Bank of Canada is expected to raise its rate. interest rate by 50 basis points – and in our view, another 100 basis points by the end of the year. The latter represents a significant shift in a factor that has been a powerful tailwind for housing demand. Add to that upcoming municipal policy measures – Toronto and Ottawa are considering empty home taxes – and the landscape looks less favorable for the market. We believe this will cool the high market temperature by several degrees. »

Written by
Penelope Graham

Penelope Graham is the editor of STOREYS. She has over a decade of experience in real estate, mortgages and personal finance. His commentary on the housing market is featured frequently in national and local media, including BNN Bloomberg, CBC, The Toronto Star, National Post and The Globe and Mail.

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