Houses, condo towers and industrial buildings are seen in downtown Kelowna, B.C., in May. Governments' plans give developers a market for unsold condos, rather than letting a market correction fully play out.DARRYL DYCK/The Canadian Press
John Turley-Ewart is a contributing columnist for The Globe and Mail, a regulatory compliance consultant and a Canadian banking historian.
A house is not a home in Canada. Nor is a condominium. They have joined the ranks of a protected industry in the minds of some decision-makers. Now, like chicken, eggs, dairy and telecoms, there is a move afoot to protect them from typical market corrections for an imagined greater good. It‘s the Canadian way.
Those on the losing end are people without a stake in this industry – Canadians who aspire to own a home, but can’t afford one because prices aren’t aligned with middle-class incomes. Those who profit are developers and existing homeowners who want high prices maintained, if not increased.
The result will be a country where homeownership is reserved for the few by design. It shouldn’t be that way.
Prime Minister Mark Carney and B.C. Premier David Eby promoted such protectionism in the name of affordability on June 18, when they announced an “innovative” financing program. They plan to use taxpayer dollars to convert 2,200 empty condos into rentals – units Vancouver-area developers “don’t want to sell at a loss,” according to Mr. Carney.
Few took Mr. Carney’s Minister of Housing and Infrastructure, Gregor Robertson, seriously when the former Vancouver mayor told reporters a year ago that housing prices didn’t have to go down, and that Ottawa needed to deliver more supply, yet “make sure the market was stable.”
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Mr. Carney is trying to make good on Mr. Robertson’s quest for stability. The increased supply is rental housing, and it is meant to buy some stability in the owner-occupied housing market by reducing the oversupply of Vancouver condos people won’t buy at developers’ sky-high prices.
Mr. Carney’s B.C. initiative is an attempt to save owners and developers from the kind of price corrections TD Economics predicted in early June. Its report details the dire state of the Greater Vancouver Area condo market, forecasting a 15-per-cent decline from a 2023 high by mid-2027. TD Economics said this would mark the deepest market correction since 2005.
The bright side for the Vancouver Area? The condo market in the Greater Toronto Area is even worse. Condo sales are so slow in the GTA it would take 20 years to clear the current inventory of unsold units if the pace continues, according to BMO Capital Markets economist Robert Kavcic.
“The one-two punch of chilly demand and high supply has sent GTA condo prices down about 25 per cent from their peak,” said TD Economics in the report.
Ontario Premier Doug Ford also has a plan, one that Mr. Carney may have taken inspiration from. Ontario is partnering with developers and institutional investors to create a $1-billion fund to convert 2,200 unsold condos to rental apartments. Through the Building Ontario Fund, Ontario is providing a loan of $300-million and investors are expected to raise an additional $733-million.
Both plans give developers a market for unsold condos, rather than letting a market correction fully play out – a correction that would be a fast and effective way to improve home ownership affordability.
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In contrast to Canada’s predilection for protecting developers, efforts in the U.S. are geared to increasing the supply and affordability of homes prospective buyers can afford.
On June 23, the House of Representatives passed, by a wide margin, a bipartisan bill that reduces regulations to make it faster and more affordable to build homes. The bill also revises lending rules so borrowers can better access funding and limits the role of institutional investors in the housing market that could otherwise drive up housing prices and consume new supply.
Far from perfect, American lawmakers are at least working to increase supply and reduce the cost of home ownership. While U.S. Republicans and Democrats see it as a threat to that goal when institutional investors buy up new builds, Canadian leaders warmly embrace them.
In Ontario, for instance, the HST rebate on new home builds isn’t reserved for owner-occupied buyers. The province has extended it to institutional investors as well, leaving families to compete against those investors for the limited supply of new-build housing as it surfaces on the market.
Investors are likely to enjoy the same liberties when Mr. Carney and Mr. Eby launch another of their housing plans in B.C., also announced on June 18. The $3.2-billion proposal would reduce development charges on new builds in priority communities over the next decade, taking up to $40,000 off the price tag for each unit in new multiunit housing projects.
To paraphrase what Mr. Carney so famously said not long ago at Davos – developers and homeowners can do what they can, and aspiring homeowners must rent what they must.