Nothing Was the Same: Housing Policy Under a Trudeau Government

The Liberal leader looks to nudge policy focus to rental housing

 By Mike Chopowick, October 11, 2015. Update: Oct 12, 2015

 

As I write this on Thanksgiving Sunday, Justin Trudeau’s Liberals look poised to win Canada’s October 19th federal election. At about 35% in the polls (a 5%-6% lead), and one week to go, we may even see a Liberal majority government (usually requiring 40% of votes) as more NDP supporters stampede back to Canada’s natural governing party.

Most pundits are currently predicting both the Liberals and Conservatives will each win about 120-130 seats each, though I think momentum in Ontario, Quebec and Atlantic Canada could push the Liberal seat count over 180 (170 is needed for a majority). If the NDP campaign continues to run out of steam, this is the easiest election prediction, ever.

If the trend in this poll continues into next week, the next Prime Minister of Canada will be Justin Trudeau (Red line = Liberal; Blue = Conservative; Orange = NDP).
If the trend in this poll continues into next week, the next Prime Minister of Canada will be Justin Trudeau (Red line = Liberal; Blue = Conservative; Orange = NDP). Source: Nanos Research/CTV News/Globe and Mail, Oct 12, 2015

 

Housing has been no-show in an election dominated by the economy, foreign policy and cultural policy issues. That’s usually a good thing, since government intervention in the housing market is typically disastrous:

• Federal tax changes in the 1970’s and 1980’s that penalize and discourage investment in new rental housing
• Tens of billions of dollars spent to construct almost 600,000 social housing units, which now require at least $3 billion annually just to repair and maintain.
• Rent controls (opposed by nine Nobel economic laureates) introduced provincially have impaired tenant choice and quality as housing providers face rapidly escalating operating, energy and capital repair costs.

What would a Liberal government change? There are some intriguing policies in Trudeau’s platform. Here they are with a bit of commentary:

 

Liberal Housing Policy – Capital Investment
Infrastructure investment to “renew federal leadership in housing, help build more housing units and refurbish existing ones, renew current co-operative agreements, and provide operational funding support for municipalities”

Analysis
There’s no telling how much money as part of the $20 billion/ten year infrastructure envelope Trudeau intends to divert to housing. Since the Federation of Municipalities has pointed out that social housing requires $3 billion a year just to refurbish existing properties, one would hope that is the priority. The Liberals are planning total new infrastructure spending (for transit, roads, housing, etc…) of $5 billion/year over the next 2 years, dropping to $3.5 billion in years 3 and 4 of their first mandate.

We know the Liberals are planning about $2 billion/year more in transit infrastructure, plus $2 billion/year more in “social infrastructure” (housing, seniors facilities, education facilities and cultural institutions). If housing attracts one-third of this investment, that’s around $650 million/year. Again, hopefully most of this goes to refurbishing old social housing, and not building new units that end up as a financial liability to municipal taxpayers.

Like all election platform costing, Trudeau's depends on certain assumptions of tax revenue and economic growth - all open to debate.
Like all election platform costing, Trudeau’s depends on certain assumptions of tax revenue and economic growth – all open to debate.


Liberal Policy – GST Rebate

Increase the new residential rental property rebate on the GST to 100 percent, eliminating all GST on new capital investments in affordable rental housing.

Analysis
This will provide around $125 million/year in tax incentives to increase and substantially renovate the supply of private sector rental housing across Canada. For developers of rental housing, where low-margin investment returns are planned over a much longer term than condominium developments, this is a big deal.

 

Liberal Policy – Financing for Rental Housing
Direct the Canada Mortgage and Housing Corporation and the new Canada Infrastructure Bank to provide financing to support construction by the private sector, social enterprises, co-ops, and the not-for-profit sector of new, affordable rental housing for middle- and low-income Canadians.

Analysis
Words like “affordable housing for middle- and low-income Canadian” appear frequently in the Liberal platform, and I won’t pretend to know what they really mean. But, enhancing borrowing liquidity, especially for capital projects in rental housing, is always important. It’s imperative that Canada re-balance its housing policies, including government-backed financing, toward rental housing instead of just home-ownership housing.

 

Liberal Policy – Land Availability
Conduct an inventory of all available federal lands and buildings that could be repurposed, and make some of these available at low cost for affordable housing.

Analysis
Private sector rental developers have been pressing this for years: One of the biggest barriers to building new apartment buildings is the cost of land, and the government owns a whole wack of it. Making federal land more available for rental housing can’t happen soon enough.

 

Liberal Policy – Home Ownership
Modernize the existing Home Buyers’ Plan so that it helps more Canadians finance the purchase of a home.

Analysis
This is code for encouraging more people who can’t really afford to buy a house to go after that “Canadian Dream” by drawing down their retirement savings. Jeez, what’s the worst that can happen?

 

Liberal Policy – Housing Price Bubble Review
Undertake a review of escalating home prices in high-priced markets – like Vancouver and Toronto – to determine whether speculation is driving up the cost of housing, and survey the policy tools that could keep home ownership within reach for more Canadians

Analysis
I can’t possibly comment on this. Just imagine if the review said, “home prices are going up in cities because more people want to live there.” I may have just done the Liberals’ job for them with that one sentence.

Liberal leader Justin Trudeau gives the thumbs up as he boards his campaign plane in Toronto, Wednesday, Sept, 9, 2015.   THE CANADIAN PRESS/ Jonathan Hayward
Liberal leader Justin Trudeau gives the thumbs up as he boards his campaign plane in Toronto, Wednesday, Sept, 9, 2015. THE CANADIAN PRESS/ Jonathan Hayward

 

Liberal Policy – Statistics Canada Data
To better support good decision-making, a Liberal government has already committed to making Statistics Canada fully independent with a mandate to collect data needed by the private sector, other orders of government, not-for-profits, and researchers. Immediately restore the mandatory long-form census to ensure data-driven decision making, including on housing.

Analysis
This is welcome news. The Canadian Chamber of Commerce, Canadian Federation of Independent Business, Canadian Economics Association, Martin Prosperity Institute, Toronto Region Board of Trade, Restaurants Canada and the Canadian Association of Business Economics¹ have all said they want the long form census to return.

I do a lot of housing policy research myself, and the National Household Survey (which replaced the long form census in 2011) simply doesn’t have the depth and detail to provide a truly clear picture of trends in housing costs, incomes, household characteristics and demographics. Statistics Canada is a valuable resource, and enhancing its data collection mandate is only a good thing.

If Liberals don’t win, this column will just be an amusing footnote
Of course, a week is a long time in politics, so let’s see what happens on October 19th. If Liberals don’t win, this column will just be an amusing footnote. If Justin Trudeau does become Prime Minister, then get ready, because he will drastically change housing policy in Canada – with many interesting changes for rental housing.

  1. Scrapping of long-form census causing long-term issues for business“, by Tavia Grant, The Globe and Mail, February 6, 2015