As real estate agents, it is our professional goal to connect customers with their dream homes. It is our ethical duty to ensure that we are able to fulfill dreams and aspirations of so many families across our community. But, in the recent months, the rising cost of homes has led to decreased home ownership opportunities.
In Metro Vancouver alone, the value of residential real estate has shot up to about 80% over the last 10 years. In addition, the value of detached homes has also risen by 110%. All bodies across the state are looking for viable solutions to counter this issue. The Government at the provincial as well as municipal level has tried to counter the issue by applying taxes. But, in retrospect, taxation rules won’t directly affect the reduced supply of homes or affect the prices of the homes.
Affordability is a very important issue that needs to be addressed in every province. At no point should there be a situation that the citizens are not able to afford homes and there seems to be no progress towards improving such an issue.
Here is a look at some of the suggestions that could possible help improve affordability and restore supply and pricing.
1. The Home Buyers’ Plan:
Since it’s inception in 1992, the Home Buyer’s Plan has helped more than 2.9 million Canadians to achieve their dreams as homeowners. The said program allows for first time homebuyers to borrow up to $25,000 individually from their RRSP, which can be used as the first down payment towards purchasing a home. Sadly, since 1992, the program has almost lost $5,500 in purchasing power and up to $2700 in 2009 post it’s adjustment.
I would recommend that the HBP withdrawal limit should be indexed to the Consumer Price Index and ensure that the adjustments are carried out only in $2500 increments such that it can prevent the effect of inflation. Also, if the HBP were extended to homeowners who are currently experiencing different situations or life changes such as relocation or death of spouse, it would go a long way in improving the situation.
2. Increase supply of transit-oriented affordable homes:
Currently, the situation is such that low and moderate-income households in Metro Vancouver often face a trade-off between transportation and housing costs. More often than not, one has to move miles from the urban areas to find affordable housing which in turn leads to significant increases in transportation costs which bear heavily on many households.
I would recommend that development should be focused on better and much more efficient use of land and transit. The government could provide funding to local transit authorities to extend the network and make it more affordable as well. Also, the government could buy land near the transit zones and build duplexes, townhouses, and small offices such that more and more low-income households can afford homes. Not only that, the government could also ideate and provide financial incentives to municipalities who can develop density rich projects such as townhomes, co-housing, cooperatives, and other forms of tenure close to transit, including collective living, which allows five or more unrelated residents to live together. These incentives would not only help reduce the costs of planning and rezoning but also help build partnerships with developers who are ready to build more affordable homes and help decrease transportation costs as well.
3. Increase the supply of affordable homes:
Push comes to shove; the real reason for the rising homes is ultimately the growing population. The up and down of prices is only short term but due to market changes, the price rise will remain constant due to increased demand which is inevitable.
I would recommend that first and foremost, the federal government should undertake research, which can explore and figure out the actual root cause of the property prices in Canada such that an informed decision can be taken. Not only that, it will also help towards finding mitigation strategies for the future. The government can also step in to increase the supply of homes for which it can employ it’ federal agencies such as the Canada Mortgage and Housing Corporation, the Department of National Defense and the Royal Canadian Mounted Police who own land in Metro Vancouver. It could offer up these properties at lower price to developers who in turn can build affordable homes and also provide tax credits as an incentive to the developers to build such affordable rental homes.
4. Incentivize to increase supply of rental homes:
As mentioned in the earlier point, incentives go a long way in trying to build affordable housing. And if history is supposed to be any proof, investors will build great affordable homes if the right kinds of incentives are provided.
I would recommend that incentives such as deferment of taxes on the recapture of previously accumulated depreciation when they sell a rental investment property and also allow to reinvest in another similar property of greater or equal value. Another incentive would be to reintroduce the rental investment program, which would go a long way in increasing supply.
5. Don’t Tax!
Many homebuyers in Metro Vancouver face huge issues when it comes to buying an affordable house. These issues range from having to save for down payments, actually find an affordable house in a good community when the supply is at such a decline, save for the taxes. These taxes include the provincial Property Transfer Tax and the federal Goods and Services Tax on the many services associated with home buying.
The one and only recommendation as defined by the title would be to not introduce any more new taxes in the name of increasing government revenue as the citizens are already stressed out enough with the existing ones.
6. Consult from professionals:
Due to mortgage rules implemented last October, many first-time buyers as well as low-ratio borrowers experienced a very steep decline in affordable housing, which led to increased issues with the financial stability.
I would recommend that before any important and drastic changes are made to the rules, professional boards or realtor agents and members should be consulted as they understand the impact of any change on buyers and the market in general.
All in All, the housing affordability issue is only increasing by the day and if the right kind of decisions in terms of economic and financial policies are not undertaken, the market go into extreme stress and turmoil.