A look at the Liberal Party’s housing plan and the implications on housing demand, supply and prices. The Liberal Housing Plan is available here for your reference.
Key Insights:
- Policies and initiatives that increase supply will help balance this market and lead to lower prices (all else being equal).
- Policies that subsidize buyers will increase demand and ultimately prices (all else being equal).
- Overall the Liberals Housing plan is weighted towards increasing demand (through buyer subsidies). More emphasis should be placed on increasing supply in order to balance the market.
The Liberal Housing Plan:
- The Liberals plan on introducing a rent-to-own program with a $1 billion commitment for loans and grants. This program has limited scale and scope and will not have a large effect on home prices in Canada. Ultimately the program seems to subsidize buyers and/or landlords which should lead to more demand (and higher prices).
- The tax free First Home Savings Account will have the largest effect on home prices and demand. This program will allow Canadians under 40 to save for their down-payment. Money put into the program will decrease taxable income similar to an RRSP contribution. Money can them be withdrawn tax free in order to be used for a down-payment. The net effect of this program is a government subsidy to young Canadians in the amount of $10K-20K depending on their marginal tax rate. This program will increase demand and ultimately lead to higher prices (all else being equal).
- The Liberal’s plan to double the First Time Home Buyers Tax Credit from $5,000 to $10,000. This increase in the credit is a direct subsidy of about $1,500 to first time home buyers. Net effect is an increase in demand and ultimately in home prices.
- A plan to reduce the insurance premiums charged by Canada Mortgage and Housing Corporation by 25%. These insurance premiums are charged on mortgages with less than 20% down. This program will save those buyers about $6,000 in insurance premiums. Net effect is increased demand and ultimately higher home prices.
- The Housing Accelerator Fund commits $4 billion to offer support to municipalities to grow their housing supply faster than their historical averages. The aim of this program is to increase supply. Assuming this program is successful, the net effect will be more supply and ultimately lower home prices (all else being equal).
- Increase the funding to the National Housing Co-Investment fund by a total of $2.7 billion over 4 years. If this money is used to build and/or repair housing in Canada the net effect will be an increase in supply and a decrease in home prices (all else being equal).
- $600 million to support the conversion of empty office and retail space into market-based housing. The net effect of this effort should lead to increased supply and thus lower home prices. $600 million is a small commitment and will most likely have little impact.
- The Multi-Generational Home Renovation tax credit will provide up to $7,500 to families looking to add a secondary unit to their home for the purposes of allowing immediate or extended family to live with them. This program should increase supply of secondary units.
- A two year temporary ban on new foreign ownership of non-recreational, residential property in Canada. The net effect of this program is to decrease housing demand and will lead to lower home prices (all else being equal).
- An anti-flipping tax on residential properties. This program, while well intentioned, will probably lead to less renovated properties and a decrease in total livable housing supply.
- Introduction of a Home Buyers’ Bill of Rights. This program has many parts to it and would require a re-working of a large part of the real estate industry. The trade in real estate is provincially regulated and thus the federal government would have to work with the provinces to implement these changes. At this point, it is unclear how and when these policy changes would be implemented.
I am always happy to answer any questions you may have.
Kind regards,
Kiril Peev
Direct: 613.263.7883 / Email: kiril@sutton.com / www.kirilpeev.ca
Sales Representative / Sutton Group – Ottawa Realty / Brokerage, Independently Owned and Operated
Hintonburg – Orleans – Kanata
Referrals are always welcome and greatly appreciated. Thank you!
