Prime Minister Justin Trudeau called a federal election for Monday, September 20, in the middle of various COVID-19 lockdowns to force millions of Canadians to go out to the polls to vote, or perhaps in anticipation that many citizens wouldn’t go out to vote.

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Historically, and before the current provincial Ford administration in Ontario, the Progressive Conservative party always appeared to be the most understanding or perhaps at least considerate of residential landlord issues. In my opinion, over the past four years or so all three main parties have essentially become “shades of the NDP.” All the parties have been making outlandish promises about arresting the housing crisis, specifically obtainability and affordability for both purchase and rental properties.

The Conservative Party’s Recovery Plan includes the party’s platform on housing affordability actions if they are elected, on pages 55 to 56. Here are my comments about their plan:

  • While the capital gains deferral is mildly interesting, it’s still only a deferral. It remains to be paid and therefore is not much of an incentive. The time period to re-invest is missing too. If it’s only one or two years, then it’s relatively meaningless since it can take years to approve a new development, and years to find a financially viable purpose-built property for sale. Most sellers have no compelling reason to sell and there are many disincentives to selling, so current seller price expectations routinely far exceed most properties’ ability to be financed. Arguably, 85 per cent of residential rental properties are financed.
  • Converting federal administration (office) properties to housing may seem like a good idea but many developers will tell you they tried that and ran into all kinds of real-life issues, especially related to natural light, environmental contamination tolerance levels, windowless floor plate size, mould, hidden deterioration and myriad other issues. Most of these converter-developers concluded that it’s much easier to tear down and re-build an office building rather than convert to residential.
  • It may be politically advantageous to separate out a special initiative for Indigenous housing needs but there are a great many non-Indigenous Canadians who are suffering from the multi-year consequences of a debilitating pandemic that have left them in desperate financial straits and possibly without a place to live too.
  • Incentives for land trusts to donate land seems nice but most of such lands are typically unserviced (no electricity, water, garbage removal and/or roads). It’s not land availability that’s needed. According to a government website, 87 per cent of Ontario is Crown land. What’s needed are serviced lands and reducing multi-year municipal zoning processes. Bylaw departments everywhere are militantly oblivious to the housing crisis, discouraging rentals at every turn “because that’s their job.” Anything done at the federal level ultimately needs provincial and municipal housing agencies to be on the same trajectory to resolving the housing crisis.

The Conservatives’ Recovery Plan appears to blame “corrupt” activities (which they don’t define) for driving up real estate prices. Forgive me, but that is utter nonsense. Establishing a beneficial ownership registry for residential property smacks of big brother and shades of the previously failed Rent Control Bureau. I recall that CMHC reported that foreign investors make up less than 0.5 per cent of Canada’s residential housing investments although I did find a statistic that non-residents owned 3.1 per cent of Toronto’s condos in 2020. Notwithstanding that, housing speculation – if that is what the Conservatives are calling “corrupt” practices – can ONLY exist when there’s high demand and low supply. Property “flipping,” assignments without ever owning the property and other price-increasing phenomena are symptoms of high demand and low supply. These practices would stop dead if supply increased such that buyers had other options than buying a quickly renovated or flipped home or the purchase of a multi-year delayed condo construction.

I like the idea of encouraging foreign investment in purpose-built rental housing but “… affordable to Canadians …” is a meaningless motherhood statement. It could also possibly be injurious to Canada’s long-term economy. Every foreign investor will calculate how much it costs to build and maintain a purpose-built property and then look at what profit they make. I believe invariably, it will be unattractive for all but large condo projects (and maybe not even then).

No one is building “missing middle” properties in particular today because they are deemed unprofitable. I don’t believe that’s true but rather that missing middle rental properties aren’t “highest and best use” for most serviced land and don’t offer the same economies of scale and return on investment as larger rental properties do. This is where government needs to create compelling incentives, but then property taxes would be much lower per square foot than a “condo-scraper” so it’s a vicious circle.

It’s socially unconscionable in my view to prevent immigrants from buying a home for a period of time by stating on the one had that housing is a human right and then denying that same right to newcomers who want to make a new life for themselves and contribute to this great country.

Reinstating the Conservatives’ “Housing First” initiative calls for creating more addiction centres. Once again, this is a response to symptoms, not cause(s). Fighting addiction must begin with regulating pharmaceutical companies and their distribution networks against distributing powerful and addictive opioids prescribed initially to combat chronic pain but which become incredibly addictive over a very short period of time – especially fentanyl. Legalizing drugs to me is a far better approach than “combating” drug abuse. It may or may not lessen the addiction but it would almost certainly lessen the criminal element and perhaps create a self-sustaining addiction-control business or industry. Was nothing learned from America’s Prohibition era?

The Canadian insurance industry ripped off Canadian consumers across the country in 2020, reporting one of its most successful and profitable years in recent history – in the middle of a global pandemic. The Competition Bureau said it couldn’t investigate unless it had a whistle blower so such profiteering abuse must be resolved by politicians. Indirectly related, I spoke to the Insurance Bureau of Canada and asked if they knew of any company that offered multi-year insurance plans. Not a single one. How about creating a multi-year insurance scheme for rental properties that gives some predictability for such costs?

Regarding mortgages, the best way by far to provide more affordable mortgages is to increase the amortization period. Even five more years (30-year) can have a dramatic effect on lowering monthly payments. The upside is that monthly and weekly mortgage payments are much more affordable. The downside is that it takes longer to build up equity, which could impact the country’s GDP-to-debt and lead to a slowing down of the economy (recession). Nevertheless, slow-building home equity is still much better than no-equity renting.

No mainstream Canadian banks to my knowledge offer greater than 25-year amortization and several don’t do more than 15 or 20 years. Banks generally don’t like longer amortization periods but CMHC insurance would make that push-back moot and it would drive consumers back into CMHC-insured mortgages after CMHC derailed itself and lost its significant market position last year. Banks strongly discourage their borrowers from obtaining CMHC insurance because the bank wants to keep the premium upside for themselves and the paperwork and qualification process with CMHC is incredibly onerous and unappealing.

Unlike most Realtors, lenders and real estate boards, I believe the stress test provides more positive benefits than negative. The problem is that those home buyers who don’t qualify because their ability to service their debt is too risky and are prevented from buying a home therefore typically remain in their rental unit. This results in a cascading “damming” effect that ultimately results in (a) more affluent people staying in their rental units longer and using rent control as a savings plan to buy a home and (b) locking out all the low-end renters and vulnerable groups who otherwise might have been able to move into the low-end of the rental market.

Providing incentives to build more purpose-built housing and second suites would break this log-jam such that a stress test might not be necessary at all. However, provincial residential housing legislation in B.C. and Ontario in particular, and to a lesser extent in Quebec, are brutal and would need to be addressed in some way for federal incentives to build rental properties to take root in these provinces.

Summary

In my opinion, the Conservative Party’s solutions in their Recovery Plan for resolving housing availability and affordability are ineffectual and demonstrate an ongoing failure to understand the root causes of the housing crisis.

I haven’t reviewed the Liberal and NDP parties’ plans but I’m fairly certain that the net result would be for a call by these other parties to massively increase government debt. This would ultimately weaken or undermine the perceived value of our currency, which would lead to a crippling recession in combination with already rapidly increasing inflation. If you think affordability is challenging today, especially for seniors and low-income earners, hyper-inflation combined with a recession would wipe out the savings of many Canadians.

I recently came to realize that most government initiatives seem to me to be about throwing available budgeted money at a problem (such as “build more houses”) rather than creating long-term self-sustaining vehicles and mechanisms that survive changes in government such as changing passive income corporate tax for rental property owners to active income or reducing amortization rates on residential rental housing capital costs.

A call for government to spend more money on constructing affordable social housing is, and always has been, fatally flawed. Rents are held artificially low and there’s no money saved for the inevitable capital costs, which is addressed by the reserve fund in condo corporations. Most social housing projects degrade over time to the point where they must be removed from the social housing inventory stock (such as Toronto’s 1,100 recently lost affordable units).

The question is then, which party should I vote for? The answer would have to lie with looking at each party’s plans of action for other top-of-mind non-housing issues and how you feel about their approach to resolving those issues. However, none of the parties to me have any idea about how to address the housing crisis.

4 COMMENTS

  1. It’s all about the ‘takers’ and the ‘makers’. The takers outnumber the makers on a ratio of likely ten to one…at the very least. Thus, political parties cater to whatever base will garner them votes…aside from who gives them the most donations. The richer a country—thus its inhabitants—becomes, the more freebies can be afforded…until it all collapses under its own weight. You can only spend so much of others’ dollars before the shit hits the fan. But the beat goes on until that happens. Politicians only consider what will get them elected, or reelected. Thus, their horizon of forward thinking is limited to five years…at most. Statesmen/Stateswomen look far deeper into the future…which is why we have few in politics.

    “Vote for me and I’ll give you the moon.” Lies the wannabe politician.

    “Don’t vote for those losers. Vote for me and I’ll give you the sun!” Lies another wannabe politician.

    “No; don’t vote for anyone but me, because I’ll give you the universe!” Lies the current in-power, back-slapping, hand-pumping, fake-smiling-at-everyone (oblivious to the fact that he/she has become a slime ball political hack) slick politician who doesn’t realize how entangled he/she has become with the tentacles of the party that controls his/her every carefully crafted speech or off-the-cuff remark. Corruption of one’s ethical standards—if one has any to begin with—takes hold early on in one’s political career. A machine politician is hatched, ready for the bull shit wars against the other guys.

    Can you envision the concept of bribery-for-votes offered with some one else’s money?

    In a democracy, we get the government we deserve.

    The young want everything for free. “Let those rich old bastards pay for it.” they’re taught at school by Marxist teachers.

    Anything free has no intrinsic value attached thereto. Free becomes worthless. When post-secondary education becomes a free-for-all, parties ensue, and we end up with educated idiots. Merit goes out the window. Mediocrity enters through the back door. Socialism gets a grip. Then the young get older, and finally grow up. “Keep your hands out of my pockets, you Socialist/Marxist/Commies!” they holler indignantly. “I’ve worked hard for my money! I’m fifty years old. Get a life you spoiled brats!” They finally get it. But this time it may be too late.

    Find out how it all ends. My revised edition of “Riley Youngblood and the Passport to Santalamanchia” will be available via the Kindle/Amazon online eBook site in a couple of weeks. I am replacing the current online edition because I have rewritten the work, getting rid of unnecessary portions and expanding on the political theme not-so-obviously-hidden within the story. There were also a number of typos etc. that needed to be weeded out. (I’ve become my own editor after having been shown how to effectively edit by my good friend, Graham Hart, retired news anchor for CHEX TV (now Global Peterborough) Ontario.) Fifty percent of all net proceeds will be donated to the Salvation Army and The Easter Seals Society, equally, in perpetuity. As of early-to-mid September next—when the revised editions should be available—invest $3.99 (US) for the eBook, or $9.99 (US) for the paperback version. It consists of 27 chapters/over 100,000 words. Most will enjoy it, I’m sure of that. If you don’t, feel free to trash it here in REM. I’ll give Jim the-editor-guy permission for anyone to say anything he/she wants to say about the novel. It’s in writing…right here.

    Brian Martindale

  2. Good article!
    The politicians have egg on their faces on this subject – they listen only to organized tenant groups – and have no time, nor regard for landlords.
    There are far too many restrictions placed on landlords to make acquiring or building more units desirable. Why risk more of your hard earned savings or mortgage yours ‘ and your childrens’ future for someone who has no respect for you or your efforts?
    Everyone wants to live in “a palace” – but so many seem to have forgotten, you have to EARN the wage to live that way. Life will get better as you invest more effort – not as you wait for yet another government handout, or government rule to have the landlord subsidise you.
    Placing one group above others based on race should not be what this country is about – once again, do the work, reap the rewards…..
    Our country is going deeper and deeper in debt to support special interest groups and vote-buying. We are losing our basic economic generators. There WILL BE A RECKONING BEFORE TOO LONG!

  3. Good commentary. I had the same thought – they were straying well into NDP territory obviously they understand that their base is lacking in numbers to get them elected.

    And their plan to build 1,000,000 new units is bloody laughable! One reason new properties are so expensive is because builders build on their own terms at their own pace, in numbers that will not flood the market with units so as to drive down prices, and that, is not anything the federal government can regulate.

  4. allowing current home owners with excess bedrooms and space with a tax benefit would open all kinds of affordable rental units.

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