By Mike Chopowick, August 18, 2015
I’ve always said that when it comes to government housing policy, no news is good news. Over the past 45 years, few good things have come from government housing policy, from nonsensical tax measures, rent control and massive subsidies for public housing (which now requires taxpayers to pay for over $2 billion in repairs, in Ontario alone).
Prime Minister Harper made three recent election announcements on housing policy. Are they mere tinkering? Perhaps not, but there is something missing.
He started the campaign announcing a permanent tax credit for homeowners who invest in renovations. This resuscitates a one-time tax credit that expired in 2010.
His 2nd housing announcement addressed the influence of foreign buyers of residential real estate in Canada, presumably to mitigate a speculative investment bubble.
The 3rd policy promise was to encourage more people to buy houses by withdrawing up to $35,000 from their retirement savings for a down payment (which may do more to fuel higher home prices than the impact of foreign investment).
It’s completely understandable why the Prime Minister made these announcements. Homeowners, and young middle-class households who intend to buy a home, represent over 70% of Canadians. Governments should deliver relief to hard working Canadians, who already spend more on taxes than food, shelter and clothing combined.
But once again, the government is neglecting tenants and rental housing providers. You know, the other 30% of Canadians, who have average incomes that are half of what homeowners earn. And, the rental apartment industry, which spends $10 billion/year on renovations and repairs, and supports over 100,000 jobs.
If a political party wanted to really help people who needed it, we’d see promises to have similar tax credits for rental apartment renovations, reduced property taxes and development charges on existing and new rental housing, and a universal monthly rental housing benefit for tenants.
During this election campaign, the Prime Minister said, “for most Canadians, the family home is their biggest asset and their most significant investment in their future financial security.”
This statement is factually accurate. But is it financially correct? Should a house be anyone’s biggest investment? That’s up for debate. Over the past 30 years house prices have gone up only 5.5% per year compared to an 8.5% return in the stock market. I know where I’d rather have my money.
There is strong merit for shifting tax relief and supportive policy to tenants and rental housing providers.
Tenants avoid paying hundreds of thousands of dollars on mortgage interest. Renting has been shown to be financially advantageous over owning for many households. And in today’s economy, renting fosters economic growth by accommodating the more mobile workforce we are seeing today. High levels of homeownership contribute to people being less likely to move toward better job prospects.
I’ve long agreed with former Prime Minister Kim Campbell, who infamously said that, “elections are not the time to discuss serious issues”. Unfortunately for her, Campbell also found out that elections are not the time to make infamous, profound statements.
I doubt that we’ll see a candidate for Prime Minister announce a policy to help more Canadians achieve “the dream of renting a home”, anytime soon. But if we really want to help improve housing affordability and economic prosperity, this is precisely what we should be hearing.
Financial Post, “CMHC says Toronto housing market at ‘high risk,’ as economists fear Tories ‘throwing fuel on fire’” , August 13, 2015
Huffington Post,”Canadian Pay a Lot in Taxes“, August 12, 2014
The Globe and Mail, “Real Estate or Stocks – Which will make you richer?” April 4, 2014
Financial Post “Should you rent or own your home?“, March 25, 2014
Florida, Richard “Homeownership’s Downsides“, from The Atlantic, July 2, 2009.