What will be the impact in the future housing and mortgage markets?
Liberal-NDP deal: What does it mean for the housing market?
Fergal McAlinden
other
The agreement should see Prime Minister Justin Trudeau remain in power until at least 2025
After securing another minority government in last September’s federal parliamentary election, Prime Minister Justin Trudeau appears to have effectively guaranteed he’ll stay in power until at least 2025 by striking a deal with the New Democratic Party (NDP).
That move will see the beginning of a confidence-and-supply agreement between Trudeau’s Liberals and the NDP, with the latter – led by Jagmeet Singh – set to support the government in parliamentary votes in exchange for progress on NDP priorities.
Two of the main likely consequences of the deal have been identified as dramatic action on national pharmacare and dental care, both of which were cornerstones of the NDP’s election platform in 2021.
It remains to be seen what impact the agreement will have on the government’s plans for the housing and mortgage markets. A long-standing NDP proposal has been the reintroduction of 30-year terms for Canada Mortgage and Housing Corporation (CMHC)-insured mortgages for first-time buyers, a policy that’s been supported by industry members and associations including Mortgage Professionals Canada (MPC).
The party also pledged in its 2021 manifesto to double the Home Buyer’s Tax Credit to $1,500 and place a foreign buyer’s tax of 20% on the sale of homes to non-Canadian citizens or permanent residents.
One of the pillars of that platform was a plan to create upwards of 500,000 units of affordable housing in the next decade, which the NDP said it would achieve through “the right mix of effective measures that work in partnership with provinces and municipalities, build capacity for social, community, and affordable housing providers, to provide rental support for co-ops, and meet environmental energy efficiency goals.”
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It’s still unclear whether any of those policies will become reality under the new Liberal-NDP arrangement. But with the current government seeming secure in its position until the next scheduled election three years down the line, a prominent member of Canada’s mortgage industry told Canadian Mortgage Professional that increasing affordability and opportunity in the housing market for young Canadians should be a key priority.
Graeme Moss (pictured top), founder and partner at Fair Mortgage Solutions, said that could involve taking an international approach and considering the work that’s being done in other countries to address affordable housing issues – policies that are working well, and others that aren’t.
“I’d also like to see the government consider outside-the-box thinking, [and] innovate,” he said. “CMHC has morphed and changed with the times. They have allowed so many people to gain and have pride in homeownership.
“It’s one of the best, no doubt – but when first brought in, it was a big change in the status quo. We need a change right now to match it, a change of thinking [and] adapting to the changing environment.”
The wellbeing and prospects of young Canadians are “paramount” to any future government policies on housing or the mortgage market, Moss said – particularly considering the affordability crisis that’s engulfed the country in recent years. “Market forces are such that the status quo is crushing the spirit and hope out of many,” he said.
Some of that “outside-the-box” thinking could include a renewed focus on micro housing, Moss said, a product type that he said was currently difficult to secure CMHC insurance for.
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“I would consider taking a property and maybe putting two to three micro houses on it, and therefore CMHC and banks could lay claim to land which is the paramount factor,” he said. “They could securitize on that and each home might be worth $100,000-$150,000 – so an affordable start.”
Members of the mortgage industry will also be looking out to see whether further changes to the stress test rate for insured and uninsured mortgages are introduced this year, with that rate having been hiked last June by the Office of the Superintendent of Financial Institutions (OSFI) and the federal finance minister.
Moss said that he would argue for keeping the stress test rate on variable mortgage products, but that the government should consider qualifying on the actual fixed rate if a borrower chooses a fixed rate over a variable one.
“Variable involves risk and change, but if they go with a five-year fixed, then there will be no payment shocks during that period,” he said.
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